Can Recruiters Predict Recessions Better Than Economists?
Firstly, I am not an economist. I am a recruiter. So I cannot claim any level of expertise on the subject of the economy, BUT, one thing I have learnt from my career as a recruiter is that the recruitment industry is a good barometer of the economy. The recruitment industry feels it first when things slow down and also when things pick up.
I remember working as a recruiter back in 2007 and 2008. Anecdotally people talk about the ‘crash of ‘08’. But my memory reflects back to 2007 when attempts at business development were not getting anywhere and the people I spoke to said that they were not hiring. Then the revenue numbers started to slow down and even one month, an entire team (of very talented recruiters) made no placements at all. This was unheard of. Then things started to unravel quickly in 2008. The point is, the signs were there in 2007, loud and clear.
Trying to predict how economic cycles work is not something I am going to do here today, but would make the point that there is a rule of thumb that they last around 10-12 years. This would have meant that the Irish economy should have been coming to the end of an economic cycle around the time that Covid hit us. This just put the economy on ice for a while, before it then turned back on.
So where does that leave us now?
One thing we have seen in GemPool since around April 2021 has been a massive surge in demand for IT staff. As a tech specialist recruitment agency, the demand we see gives us a unique view of the IT industry, within the Irish economy. This surge in demand definitely felt like the result of the pent up demand as a result of Covid.
During the pandemic, companies in the IT industry could be roughly put into one of three buckets. They were either ‘Thriving’, ‘Hiding’ or ‘Surviving’. Those companies thriving were perfectly positioned to take advantage of the new world order. Companies like Zoom and Amazon are clear examples. Those companies surviving were hustling to stay alive. Many had to cut staff, or pivot quickly. Then there was the largest group, those hiding. These companies were being prudent, not spending, but still profitable. They were waiting to see how the pandemic would play out.
This is where the pent up demand has been and that is why the talent market has gotten so uniquely competitive over the last year.
What have we seen as a result of this shift?
We have seen salaries inflate, talent move and create real problems for companies whose business models bend and crack under the pressure of trying to retain and attract staff with higher salaries, benefits and remote working.
What are we seeing in 2022?
Fast forward to April 2022 and we find ourselves in a very strange place. The expectation had been that, coming out of Covid, once again we can define clear business plans and go back to growth and some sense of predictability. Not so. If anything, the economy is more VUCA than ever. The term VUCA was coined in the US army to describe situations that are Volatile, Uncertain, Complex and Ambiguous.
Yes, we have a much better grapple on Covid and can make long term business decisions as a result of this, but there are so many other macroeconomic factors at play that could lead to so many different things happening in Ireland.
I thought it useful to reflect on three factors and how these might impact the talent market in the tech sector in Ireland:
War in Ukraine
It's impossible to know how this will play out over the coming months. Everyone hopes it does not escalate into a war across Europe, which would be devastating. Ultimately, Ireland’s role to date has been to support and show solidarity with Ukraine and the EU.
This is through financial support, political support and also taking in refugees. One thing we have seen in the talent market here is demand for contracting talent in mainland Europe, which was normally served by lower-cost providers in Eastern Europe, is now being served further west. It's too early to tell yet, but the flow of refugees to Ireland will also potentially bring tech talent to work in jobs here.
The war has also created major issues with gas and oil supply and prices. Lines are being drawn in the sand politically also with some countries willing to take Russian gas (like Germany) and others who won't (like Poland and Bulgaria).On a more global scale, the war has forced countries to nearly take a side, potentially creating an ‘us and them’ attitude. What will this mean for global trade over the coming years? Already, many big tech brands have pulled out of Russia and closed their offices or stopped trading there. Examples of this are Apple, AWS, Ericsson, Netflix, IBM, Microsoft and the list goes on and on. It will be a long time before they open up in that market again. Will this happen in other countries too? What will this mean for FDI into Ireland?
Everyone can feel the prices of food, heating, fuel in cars etc. going up and up. This was already happening before Putin went into Ukraine. The war made it worse. This week the US treasury is due to increase interest rates, the ECB has not and is holding firm for now.
So what does it all mean? The obvious answer is that it will drive us into recession. Some economists still feel that inflation is temporary. I don't know either way. But what I do know is that from the recruitment perspective, it has further fuelled the inflation of salary demands in the market.In Ireland, we have a unique trend at play in the tech sector. There are companies who are willing to pay way above market rates for talent. What we are also just starting to see now, is a slow down in willingness to move jobs for those candidates who feel like they are in a solid company. Potentially we can attribute this to some feelings that there are gray clouds on the horizon (or here already).
This is a topic that a few of us here at GemPool have written about over the last couple of years. But we are now at a pivotal moment. The majority of companies have decided on their work setup and how this will look into the future. The minority are going back into the office full time, the majority are going hybrid and then others fully remote.
From talking to candidates all day, every day, we have a really good sense of what the tech talent in Ireland wants. In a nutshell it's as much flexibility as possible. Ideally remote but will have the option to come in from time to time for meetings and gatherings. But most people are happy to go in for 1-2 days a week.
On a more macro level, remote working has changed the dynamic of the talent market. Now you can hire someone in another country very easily. It's not totally frictionless, but it's getting there.
Things to take into consideration with remote working:
- The question of how the payment of tax would work is being solved, as you have companies who can provide employer of record services or be the hiring entity in that country while they work for you.
- The question of benefits packages for different people in different countries can be messy. If you are a tech start up and you want to share plans across geographies, this can be awkward too. But there are always workarounds.
So this has opened up talent pools to companies in areas that were not previously considered, which is exciting. It is a breath of fresh air as it means the sharing of diverse perspectives becomes more normal, which will increase tolerance and inclusivity. It also means that talent can move more freely potentially.
Things to be aware of:
Remote working has changed the way that we work and also live. This in turn has shifted the mindset in the workplace around what is important, what people want to do with their lives and which companies they want to work for.
There is a major trend where candidates are priortising companies based on their beliefs and values more and less based on what they actually do. Employers need to do more to articulate their values and principles, in order to attract the talent.
So while economists are still much better placed, and trained, to predict the likelihood of a recession or economic trend, the recruitment industry really does give us some very clear indicators of what is going on on the ground, and what this might mean for an economy.
As we look forward to April 2023, it really is an exercise in futility to try to predict what will happen. But as recruiters working in the tech recruitment industry in Ireland, things are still tipping along nicely so far. But winds of change are swirling around and there is a feeling of some gray clouds ahead. What this might mean for the economy, lets see.
Thank you for taking the time to read this blog and if you want to discuss any of these points, I would welcome the opportunity to speak with you about it. You can reach us through our contact us form and you can read more of our career insights page.
Cover image attribution: Profit and loss vector created by jcomp - www.freepik.com