3 ways inflation impacts the current hiring market
The current rate of inflation for the United States as of the most recent data is 8.3%. This is down from its 40-year high of 8.5% in July 2022.
This has been immediately felt in our economy. We had to spend more on goods and less on services or discretionary items. Everything costs more, and it’s making it harder to purchase basic items such as food, gasoline, etc.
But inflation has also had a negative impact on the hiring market. Inflation drives up wages because there’s an increase in demand for services.
So, even though wages have increased in recent years because of a tight hiring market with more job openings than available employees, inflation has hurt that wage growth.
Here are ways we’re seeing inflation impact the current hiring market:
- Inflated Compensation: As we mentioned previously, inflation has driven wages up. This immediately makes it more difficult for companies to compete for candidates as they are looking to hire. Companies are going to have to compete to get candidates, and what they may have set aside for compensation may not cut it anymore in this current environment. If you’re looking to make a hire, you can expect some sticker shock when you hear what that candidate is asking for in compensation, but that’s just what the market is currently demanding.
- Trimming of the workforce: We’re hearing a mixed bag from clients about trimming their workforce and no longer looking to hire for certain roles. This largely has to do with the industry because some have been or will be hit harder by recessionary or inflationary pressures.
- A battle for internal equity: Leaders will be faced with a new challenge brought on by these inflationary pressures. Employees are aware of what they are worth in the marketplace, what they can get from other companies and what current open positions are going for. It will be a challenge for employers to meet the current needs of the market while also maintaining a level playing field with other employees. While that might not mean a blanket raise across the board, managers will still need to show current employees that they care about their needs.
The inflation rate and threat of recession are currently being felt by employers and employees and it’s not something that will go away overnight. You’re still going to be met with the challenge of retaining your current employees and hiring that leader worth following who can change your business. If your company needs help filling those critical roles, we can help you through our Retained Executive Search and RPO services.