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Like a lot of you, even though it was a big deal early in my career, I don’t often reflect on the financial crisis of 2007-2008 and its profound repercussions on both the economy and people’s lives. For many individuals around my age (43), those tumultuous events now seem distant, fading in the rear-view mirror. During the first two weeks of April, we’ve seen incredible stock market volatility that’s brought up concerns of a recession, potential shifts in the labor market, along with other worries.
Here's another startling fact to me: nearly half of today’s workforce is younger than I am. For this cohort, the last major recession isn’t a lived memory but rather a historical event studied in classrooms. They didn’t directly experience the sudden disappearance of jobs, widespread home foreclosures, or the palpable fear that the economy itself was on the brink of collapse. Even for those of us who did endure that period, our memories have inevitably blurred over time.
Why does History Matter?
Understanding this generational context is essential when analyzing our current employment landscape. The era of the “Great Resignation,” characterized by frequent job changes and significant salary hikes, has given way to a considerably tighter market. Layoffs, initially concentrated in technology sectors, have expanded more broadly, profoundly reshaping job opportunities and security.
Recessions typically have severe impacts on new graduate hires and individuals seeking to change jobs. Data consistently shows that graduates entering the workforce during recessions face lower starting salaries, slower career progression, and diminished lifetime earnings compared to those entering during stable economic conditions. Similarly, job switchers during downturns often accept smaller raises or lateral moves rather than the significant salary increases common during booming economic periods.
Observations from Today's Labor Climate
As someone who closely monitors labor market developments and workplace culture, I offer these pragmatic observations—not intended as alarmist or political commentary—but as daily reminders I personally reflect upon these 3 trends.
1. Lean Pay Increases
Salary increases and merit raises this year are likely to be notably leaner than in recent memory. Employees unfamiliar with such economic cycles might react with frustration or even threaten departure, anticipating negotiations similar to those of recent years. Unlike in 2022, today’s employers might simply accept resignations without extending counteroffers, and nearby competitors may no longer rush to outbid current employers. Proceed cautiously with salary negotiations; online forums often contain bold advice that may no longer align with reality.
2. Rising Performance Expectations
In the aftermath of COVID disruptions, tolerating mediocre job performance became somewhat commonplace. High employee turnover, the shift to remote work, and the prevalence of newly appointed managers created an environment of lowered expectations. The unofficial office mantra had become “fake it until you make it.” However, indications strongly suggest that workplaces are now reverting to more stringent performance standards and clearer expectations.
3. The Impact of AI and Automation
Companies continue aggressively pursuing artificial intelligence and automation initiatives, with boards increasingly pressuring management teams to identify additional cost-saving opportunities. Managers face the delicate task of integrating these technological advancements without harming employee morale or productivity. This shift toward automation and AI can induce significant anxiety among workers, especially as roles transform or become obsolete.
What’s the Net Impact on Workers?
We are entering a labor market significantly less “employee-friendly” than anything experienced over the last 16 to 17 years. For professionals accustomed only to recent prosperity, this shift might feel particularly stark.
Now may not be the best moment to push aggressively for additional workplace perks. Threats of resignations may be met with an open door instead of a counter-offer for some. Opportunities for promotions may become more scarce as middle management is under a particular threat from AI.
However, on the other side, with AI and information flowing around, opportunities abound to enhance your skills. In times of economic disruptions, you can forge meaningful professional relationships. And performance can become more attainable the faster you adapt to new tools and new change.
Final Thoughts
A critical factor is accurately gauging your organization’s current climate and adapting proactively to current realities rather than yearning for past conditions.