How Economic Uncertainty Shapes the Recruitment Market
Key Ways The Economy Affects the Recruitment Market
The recruitment industry and the economy are intertwined. When the economy is good, recruitment professionals tend to be optimistic about growth and profits. However, even when the economy is performing well, recruitment professionals know that things can change suddenly, and economic uncertainty can wreak havoc on the industry. In this article, we will look at the key ways the economy influences the recruitment market.
Employment Levels
A low unemployment rate is typically a sign of a strong economy, and politicians love to point to this figure to prove their policies are working. However, it is not always the best thing for recruiters. When unemployment is low, there is a decline in the number of people switching jobs, leading to a decrease in demand for recruiters and ultimately a decline in profit. Not all low unemployment environments are the same. There are often cases where the unemployment rate may be low, but there are large skill shortages. In this scenario, where companies are struggling to find suitable employees, recruiters can excel. Recruiters can tap into their extensive networks and fill these talent gaps. Recruitment firms that focus on industries that often suffer skills shortages, such as tech and engineering, can be incredibly successful during periods of low unemployment. Recruitment firms need to keep a close eye on which industries are suffering skills shortages and start building a network of recruits in these areas. Even though employment rates are strong now, that could always change. A sudden shock to the economy could trigger a severe decline in the employment rate.
These shocks are impossible to predict, but a recruitment firm can prepare for them by keeping a strong network of potential recruits. Once the shock occurs, and many people are now looking for new jobs, recruiters can step in and help land them a role. However, recruiters will have to deal with the fact that many companies wont be hiring and reducing their salary budgets. Employment levels play a critical role in the recruitment industry. However, the relationship between employment levels and recruiting is not always straightforward as both low and high unemployment can be optimal conditions based on compounding factors. To ensure recruitment firms can thrive no matter the environment, they must continue adding value to new clients, building long-term relationships, and always developing their pool of candidates.
Of course, not all potential recruits are employable. For instance, even when looking for employment, some veterans are unemployable due to a disability incurred when fighting for their country. In cases like this it is important they are able to have access to benefits (more information about that here) to ensure they can get the medical care and treatment required. So, even in uncertain times of employment, there are still issues with military people trying to fit back into the workforce.
The Way We Work Is Changing
It is important to acknowledge that the nature of employment is shifting, and people are opting to work in radically different ways than even 20 years ago. The days of the 9 to 5 and permanent office roles are quickly disappearing. Instead, more workers take part-time roles, remote positions, freelancing, and start their micro-businesses every year. As self-employment skyrockets throughout the world, what role will recruiters play? Will they still be needed? Of course, they will! Freelancing and contracted work are nothing new. Historically, these activities have not affected the recruitment industry. However, you can expect more recruitment firms to focus more on companies to help find contractors and freelancers. Recruiters can also play an important role in helping self-employed people find clients.
The upward trend of self-employment and freelancing may be temporary. As economies weaken, people tend to value safety and a steady paycheck over freedom of time and flexible working conditions. As a result, during the next economic downturn, we could see many freelancers abandon the gig economy and return to more traditional forms of employment. In this situation, recruiters need to be ready to help former freelancers transition back into the 9 to 5 world. The process of matching employers with suitable candidates is by no means easy, even with the aid of digital talent platforms. Specialist recruiters still play a critical role in vetting candidates via background checks, testing centers, and interviews. So it is unlikely that the gig economy will render recruitment professionals obsolete. However, you can expect recruitment firms to offer their services through digital talent platforms, which help businesses connect with any potential candidate and focus more on helping companies find talented contractors.
Globalization
Thanks to globalization, ease of travel, and the internet, candidates no longer have to settle for roles in their hometown or even country! Every year more and more people accept international roles and move to new countries. Is globalization a positive or negative trend for the recruitment industry, and how can firms take advantage?
Globalization is the perfect trend for recruitment companies that want to expand and send their company into growth mode. Recruitment firms that want to take advantage of globalization should establish contacts and a pool of candidates in countries that produce recruits with in- demand skills. Tech hub spots like Estonia, Ukraine, and India are filled with young and hungry candidates looking for big opportunities in Western companies. Likewise, Western companies are dealing with shortages in STEM-related fields. Recruitment firms should also be forging relationships with companies in countries where skilled workers are attracted so they can easily pair their candidates with available roles. While expanding a recruitment firm overseas sounds like an incredible idea, it can be risky. Dealing with different laws, economies, languages, and cultural norms can quickly overcome even the most experienced recruitment companies. Therefore, before expanding internationally, recruitment companies should be prepared for challenges and spend significant resources researching and developing a strategy.
Company Growth
When the economy tanks, companies immediately start cutting costs and re-arranging budgets. During this period, many companies aren’t hiring, and if they are, they won’t pay high recruitment fees. Companies also look for ways to ramp up automation and replace existing jobs to drive down costs further. This can make it extremely challenging for recruitment professionals to find roles for their candidates.
During an economic downturn, recruitment companies often need to diversify their services. Firms specializing too much during economic declines can see a huge chunk of their revenue disappear, especially if they focus on industries that are particularly hit by the downturn. Robust recruitment firms tend to switch to offering consultancy and strategic hiring services. To win this type of business, recruitment companies need to display analytical capabilities and access the latest technology. Recruitment firms that can show businesses they can do more than simply find candidates and offer strategic insight will thrive no matter the economic environment.
Conclusion
The relationship between the economy and the recruitment industry is not always positively correlated. Many co-factors can result in recruiting firms thriving in tough economic conditions and struggling during periods of prosperity. Suppose recruitment companies want to excel no matter the economic environment. In that case, they need to form long-term relationships with companies, cultivate a large and highly vetted pool of candidates, and use the most advanced recruitment techniques.
