How Does a Recession Affect Recruiting?

With an economic downturn seemingly on the horizon, many people are wondering how the labor market and work will be changed as a result. While the answer is up in the air, for now, we can make predictions and draw on past experiences to prepare for the future. From developing more misfit situations to increasing the number of applicants, here are some insights into how a recession can affect recruiting.

Creates More Person-Job Misfits

During a recession, most companies try to cut costs by laying off several employees at once. Of course, a job market with few jobs and many job seekers can often result in more person-job misfits.

A person-job misfit happens when an applicant is hired for a position for which they do not fit. It can be because of over-qualification or irrelevant skills and experience. Basically, this leads to a mismatch between job seekers and available jobs.

During a recession, companies may focus on hiring individuals with more experience, regardless of their skills and values. This is because companies are less willing to put time and money into training new talent. They would rather have someone who can start off strong.

Additionally, job seekers would be more eager to secure employment, so they would accept jobs that are not a good fit for their skills and experience. This means that they could settle for jobs that do not use their full potential.

Paw Vej
Chief Operating Officer, Financer.com

Transforms Entry-level Applicants from More Experienced Careers

Recessions can wreak havoc on entire industries, and the employees in those industries are going to transition to other spaces that aren’t as affected by economic downturns, even if it means starting over. Someone with ten years of retail experience is going to move on to something in the digital realm because that is where the jobs are going.

If you’re in an industry that is attractive to those leaving a floundering industry, you’re going to have more applications to wade through, and a higher percentage of those applications are going to be filled out by people with little-to-no experience in your sector. You also have to decide whether to take a chance on one or more of those candidates, which can be a big thing to consider.

Brittany Dolin
Co-Founder, Pocketbook Agency

Lowers Overall Likelihood of Hiring

One significant effect is that organizations are less likely to hire new workers due to cost-cutting measures. This means that employers are more selective in choosing candidates and may even place a moratorium on certain types of positions.

Additionally, job seekers may be more cautious during a recession since they may not be sure if their job is secure or not. This can lead to more competition for fewer positions and longer hiring times. Companies are also likely to offer lower salaries than during periods of economic stability, which can lead to job seekers feeling less motivated to apply for jobs.

Brenton Thomas
CEO, Twibi Digital Marketing Agency

Places More Obstacles in Front of Recruiters

In the short term, businesses may lay off existing employees or stop hiring new ones altogether. Additionally, businesses may freeze pay increases or salaries may be reduced because of less demand for products or services by customers and clients.

Recruiters will have a harder time convincing potential candidates that this is an ideal time to join the business when there are no benefits, like increased pay or job security. On the other hand, in the long term, recessions often lead well-positioned organizations to target new markets with innovative solutions by newly hired personnel during economic upturns as they prepare for future growth prospects.

In addition, during times of economic uncertainty, there is less competition among applicants, making it easier for recruiters to select top talent from a larger pool of applicants compared with previous years when the competition was fierce. Astute recruiters can look past general resumes and focus on what makes each applicant unique.

Travis Lindemoen
Managing Director, nexus IT group

Limits an Employer’s Ability to Give Raises

A recession can have a notable effect on recruiting efforts, as businesses struggle to maintain multiple departments with limited financial resources.

An example of this is the inability of many employers to give raises; although it is likely that workers will continue to be recruited, it may be at the same salary as before or even lower sometimes, which reduces the overall money available. This lack of growth potential could further limit the pool of qualified applicants who are willing and able to take on new job opportunities.

Grace He
People and Culture Director, TeamBuilding

Changes Recruiting from One Phase to Another

Although the number of job opportunities may decrease during a recession, the recruiting function remains robust. It alters from trying to find qualified applicants who are looking to change building a talent pipeline for future needs.

Many more talented people who are currently employed are open to a dialogue in an uncertain economy, so if you concentrate your efforts on talent acquisition, you can create a pool of fantastic candidates that you otherwise might not have been able to reach if the economy was strong.

Dave Haney
CEO, Surety Systems, Inc.

Generates a More Helpful Situation

Contrary to what many companies believe, as a veteran recruiter, I contend that one of the best times to recruit is during a recession. Here’s why—during a recession, most companies halt their hiring. By continuing to interview, and possibly hire, during slow economic times sends a clear message to those talking to you that your company is resilient.

In addition, with fewer companies interviewing, you are less likely to get into a bidding war against another firm vying for the same candidate. Also, your chosen candidate will probably not be receiving a counteroffer from their current company.

Obviously, you don’t want to offer them a lower compensation package, but you definitely will not get into a bidding war and have to overpay. Finally, during a recession, many external recruiters may discount their fees in order to get your business. All good reasons to continue recruiting regardless of the economic climate.

Jamie McCann
Executive Recruiter, 3AM Marketing Services

Shifts to Working With Limited Resources

Business owners and leaders are feeling pressure to reduce costs and overhead, leaving recruiters to work with very limited resources, especially as costs continue to increase. As such, the cost of recruiting has gone up significantly, and resources available to recruiters will continue to decrease.

It’s no secret that economic uncertainty impacts recruiting. 2022 was a year of increasing inflation, leaving many companies actively contemplating cutting recruiting resources in order to save costs. This not only slows hiring in different industries, but it also can negatively impact the company’s bottom line.

Yes, recruiting is expensive, but it’s also necessary. The recruiting process sets the tone for a new employee’s entire experience. As a company, you want to present yourself as strong, inclusive and encouraging. Cutting recruiting resources will make your company seem essentially cheap and uninviting, and this deters quality talent from walking through your doors.

David Lewis
CEO and Founder, Monegenix

Increases Talent Quantity, but not Necessarily Quality

The reality is that yes, there’s more talent on the market, but that doesn’t mean there’s more exceptional talent on the market.

The last few years were a candidate’s market, where they were demanding high salaries and expected certain lifestyle accommodations. Many companies had to make hires based on tight budgets and where the market was, which was extraordinarily competitive.

This is a time to really dive in and assess your team’s skills against the business outcomes you seek. If you do not feel you have the best-in-class talent to achieve those outcomes, it’s a good time to network and up-level your talent or invest in upskilling your current team.

Kristine Shine
Founder and CEO, Shine Talent

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