During a recession the economy experiences a decrease in economic activity for two consecutive quarters, although the final decision is made by the National Bureau of Economic Research. In May, data revealed that a majority of Americans believe that the US economy is facing a recession. While the United States is not currently experiencing a recession, this pessimistic outlook on the economy–despite rising GDP and declining inflation–has been largely driven by prices that continue to rise. In fact, the cost of living is one of the greatest concerns among Americans in their day-to-day lives. So, while the economy isn’t yet in a recession, it is facing many pressures that could drive it down throughout 2024 and the year to come.
According to the Conference Board, GDP growth will likely cool down as a result of high prices and high interest rates. After GDP growth of 1.4% in the first quarter and 2.8% in the second, the third quarter of 2024 will likely see GDP growth slow to 0.6% and reach 1.0% in 2025.
In July, while inflation fell under 3% for the first time in three years, the Federal Reserve has yet to cut interest rates. Economists believe that at the Fed’s September meeting, the federal agency will begin lowering the interest rates that have remained at a range of 5.25% to 5.50% for more than a year. However, there remains uncertainty as inflation is still above the Fed’s goal of 2.0%. Deloitte anticipates that inflation will fall to 2.7% by the end of this year, with the Fed cutting interest rates to a neutral 2.5% to 3.0% by 2027.
As the US faces these economic challenges, the labor market is also on a decline. In July, the growth of new jobs began to slow and unemployment began creeping upwards. Data from the Bureau of Labor Statistics showed that July had the second lowest new job gain in the past four years and unemployment grew to the highest level since October 2021. This news was seen by investors as a warning sign, driving a selloff and a dip in the stock market. However, this weakening labor market is driving hopes that the Fed will begin to cut interest rates in the near future.
Foreign Forces
Earlier this year, both Japan and the United Kingdom reported entering into a recession after two consecutive quarters of negative GDP growth. In Japan, during a recession the economy experiences downward trends driven by fourteen consecutive years of population decline. In the UK, its recession stemmed from shrinking consumer spending. In February, it was also reported that the German economy was likely facing a recession spurred by low consumer confidence and high interest rates. While the US has not been officially declared to be in a recession, and it has not experienced two consecutive quarters of economic decline, unforeseen circumstances can always arrive that can drive the US economy down.
In addition, ongoing conflicts abroad are also having an impact on the US economy. While the US does little direct trade with Ukraine, the prolonged conflict is continuing to affect industries such as semiconductors, energy, and food, which has a significant impact on supply chains. Likewise, the Israel-Hamas war also has the potential to tip the global economy towards a recession. If other Middle Eastern countries are drawn into the conflict, it could disrupt the supply of oil and cause prices to skyrocket, slowing global economic growth.
Navigating Challenging Economic Environments
For HR departments, dealing with economic uncertainties can be a challenging task. If the economy is heading towards a recession, outsourcing HR to an experienced HRO can help streamline operations and control costs in a way that helps organizations weather economic storms. First, outsourcing to an HRO allows companies with 75 to 6,000 employees to focus on core operations and reduce internal HR functions to the basics to control costs. With a reliable HRO, companies can avoid hiring costly senior HR professionals and reduce expenditures on HR training and development programs. Alternatively, an HRO is a great way to ensure all HR functions are appropriately covered when economic pressures may cause an organization to reduce headcount to control costs.
A reliable HRO is also an effective way to address talent gaps or shortages. During a recession the economy experiences changes within the labor market, which can affect HR departments. When companies are faced with insufficient HR talent, turning to an HRO allows these organizations to tap into expertise that a seasoned HRO brings to the table. An HRO can offer the support and level of service as an entire HR department, without needing to hire any new internal employees. Working with a good HRO makes it easy to scale services up or down as needed, which can be extremely helpful as the economy shifts.
Turning to Corban OneSource
During a recession the economy experiences many changes that can affect HR operations. To effectively weather the storm, companies should consider outsourcing to an experienced partner like Corban OneSource. For nearly 30 years, we’ve been a trusted source of HR expertise for companies with 75 to 6,000 employees. From payroll to benefits and general HR administration, Corban OneSource enables companies to streamline the HR process, provide superior employee service, improve compliance, and increase accuracy.
As a result, HR departments have more time to focus on strategic HR priorities that will help propel the business forward during a recession or economic downturn. Corban OneSource offers full-service support, enabling your HR department to leverage as many services as needed to streamline operations and improve cost-control measures.
With experience spanning various industries, Corban OneSource can effectively customize the services we provide for your organization. Not only do we address short-term HR requirements, we can also help your organization adapt to the continually changing landscape to prepare for the future. To learn more, contact our experienced team today.
