02 Feb The Coming Recession: Key Hiring Trends Leading Up to It
Over the past few years, my colleague Michael and I have fielded a noticeable increase in recession-related questions. As co-founders of an agency that negotiates job offers on behalf of top tech talent, it comes with the territory. Navigating the job market is our bread and butter.
Unless decades of historical economic data were to suddenly mislead us, we know a downturn is coming. While ten years of solid economic growth has been fantastic, all good things must come to an end at some point. But what happens as the booming economy inevitably slows? And what happens once we are actually living it?
In this post, I offer some perspective as to what we’re currently seeing in the job market leading up to a recession, and what I predict may happen once it hits. The predictions within are my own and should be interpreted as theoretical. I hope you enjoy.
Happening Now: Hiring Trends in Anticipation of Recession
My colleague Michael recently made a guest appearance on Bloomberg Technology, where he touched on the recent and ongoing trade wars. Although different from a recession, the trade wars have had far-reaching implications, giving us a window (and some clues) into how economic instability might impact hiring.
A crucial theme when it comes to hiring and economic uncertainty is risk aversion. As we’ve seen with the trade wars, and as we’ll continue to see as a recession looms, companies are increasingly risk-averse in how they approach hiring.
But that doesn’t mean companies are putting a freeze on hiring. In some cases, especially in tech, it’s actually the opposite. Because the risk isn’t necessarily the recession itself. Rather, the risk is the threat of a hiring freeze.
Today’s top companies are trying to get key hires in the door before resources dry up. The thinking here is if a key hire must be made, better land the perfect candidate while you can. Once a recession hits, freezes will likely take effect, and you might miss the opportunity. And if you don’t have a top-tier staff heading into a downturn, you’ll lose a competitive edge on top of suffering typical recession ramifications (i.e., reduced sales, growth).
What Will Happen: Recession Implications on Hiring
Since tech has become such a strong sector, it’s more stable than most other industries. When a recession next hits, some jobs may leave and never come back (automation may hasten that, but that’s an entirely different article). If you’re in tech, this shouldn’t be as much of a worry. Today’s most expendable jobs are those that would be replaced by tech in the amount of time it takes for a declined economy to recover.
With that said, no sector is safe from job cuts and downsizing during a recession. We maintain an optimistic outlook on the state of the tech industry, even in the face of an economic downturn. But no company is above hiring freezes and layoffs when the economy contracts.
Also, keep in mind that a recession will have a tiered impact in some industries. Venture capital is a classic example. When the cash flow begins to slow at the top, startups will feel the burn of a trickle-down effect, and this could create much tighter hiring budgets. It’s no secret that some of today’s most notable startups have already been massively overvalued (WeWork, for example). Combined with a recession, I predict we’ll see corrections in the VC space.
The key thing about tech, however, is the work itself is too important to do away with. If you’re a developer or an IT specialist who gets laid off during a recession, it’s not because your work is unimportant. Chances are, the work still needs to get done, and the decision is simply a cost-cutting measure.
My prediction is this trend will fuel the freelance talent economy, even once the recession hits. Companies may reduce overhead by cutting staff, but the cost-value ratio of tech work is simply too strong. Resources will continue to be allocated to tech-related departments, but for many companies, the strategy will shift from hiring W2 employees to hiring independent contractors.
This means opportunity for anyone in tech. Whether you brace for the recession as a W2 employee or as a freelancer, I predict work opportunities will remain abundant.
Once the downturn hits, keep in mind this abundance likely will not be reflected in the numbers. Data on unemployment primarily pulls from full-time work figures, and freelance data is tracked separately. But if this prediction is accurate, you as the tech professional will experience it firsthand.
Leverage for Those in the Job Market
What does this all mean for those in the tech job market? Well, as of today you’re in pretty good shape. At 10x Ascend, we recently negotiated a great deal for a CTO with a top tech company. Throughout the process, we saw noticeable urgency on the other side of the negotiation table. They moved quickly and packed the deal with pretty much everything our client wanted.
And at our sister company, 10x Management, where we represent senior freelance tech talent, this has been our most robust year to date. We credit some of this (and similar occurrences with other clients) to much of what I explained above.
The stability of this type of negotiation leverage can be tricky to navigate, however. Keep in mind that we’re discussing general trends throughout this post. Not every company is operating under the same risk-aversion urgency we’re increasingly seeing. But if nothing else, this leverage is worth noting as you prepare for a negotiation in today’s economic climate.
Some companies might contend that they have the leverage leading up to a recession. After all, once the recession hits, unemployed folks seeking full-time employment are at the mercy of the few-and-far between companies still making hires. Our stance is that once the recession truly hits, yes, companies will have the leverage (*with those seeking full-time positions; not with freelancers). But until such a tipping point occurs, the power balance favors job candidates.
Final Thoughts on the Tech Jobs Leading Up to a Recession
My overall hope is that a looming recession is little reason for stress among tech professionals. If I’m correct in predicting the talent economy will remain stable through a downturn, there really is no reason to fear.
Worst case scenario, you’re a full-time tech professional who might be forced to embrace the talent economy. And for those already freelancing, they may not see any change at all. If you take away nothing else from this post, remember that the work will always need to get done when it comes to tech. Throughout a recession, the structure of employment deals may change, but demand for your skills will not. This considered, those in tech can take a deep breath. Aaahhhhhh…