There are a lot of conflicting reports about the state of the current job market and its impact on a recession.
We have started to see a slight uptick in the unemployment rate and a growing trend of layoffs and hiring freezes from large corporations across the U.S.
Implementing a hiring freeze is a big decision for any business owner. Many businesses have struggled to find talent to fill crucial roles over the past two years, so while you might still need the help, ultimately you’ll need to look at your bottom line and current costs before making the decision whether or not to stop hiring for new roles.
What is a hiring freeze?
A hiring freeze is what happens when a company stops hiring for open positions or for new positions that need to be filled. This is a strategic move by a company as a cost-cutting measure. The freeze can occur because a business is forecasting less revenue in the next quarter and is feeling financial stress in the short term. It buys them time to reassess their immediate needs and make better use of their existing resources.
Hiring freezes in the job market now
While the labor market is still strong, it’s showing gradual signs of slowing down. The most recent Bureau of Labor Statistics employment numbers from Nov. 5 says the unemployment rate has increased by 0.2 percentage points to 3.7 percent. However, employers still added 261,000 jobs in October. This was less than what was added in September but still greater than what economists had predicted for the month.
The current job market suggests that as long as “the demand for company goods and services remains strong, those companies will still likely keep hiring.” But one of the reasons many companies fear a hiring freeze is inevitable is because of what they’ve seen in large tech companies across the U.S. While it may not have the same effect on small businesses, it can have a greater impact on the U.S. economy as a whole.
Reasons to implement a hiring freeze
It may be necessary for your business to implement a hiring freeze in order to conserve revenue for its essential staff and money needed on hand to pay for short-term funding needs, and emergencies.
Even in a hiring freeze, a business’s No. 1 goal is to remain profitable, and this allows them to do so while also giving themselves time to improve their position and avoid layoffs. If your business is in a position where your earnings are lower than predicted and you’re starting to feel the stress on your budget, then a hiring freeze will immediately reduce recruitment and onboarding costs, which can be applied to your bottom line.
A hiring freeze doesn’t necessarily mean an employee’s job is in danger, but it could mean that your team will feel the immediate stress in the next 3, 6, 9 months or however long the freeze is implemented. Employee morale and well-being can be affected if you start adding responsibilities and duties to an employee’s plate with no clear indication of when it will be reversed.
A silver lining
Even during a hiring freeze, employers can still find ways to hire strategically through the use of freelancers or employees with short-term contracts. These employees work hourly and are not paid benefits like other salaried employees.
Invest in training
The current hiring market is in a constant state of flux. It might be tempting to immediately start cutting costs so you can save toward your bottom line, But your approach to savings shouldn’t be to cut programs that your employees have asked for. Read more about why a recession is actually a great time to start investing in training your current employees.