Everyone is wondering whether the global economy is going into recession — or if we are already in one.
Inflation in several countries has been on a spiral lately. In the US alone, it is at a 40-year high. The Federal bank lifted its benchmark rate by 75 basis points for the third consecutive time this year, the first time since the early 1990s. The prices of commodities have increased steadily. The war in Ukraine has pushed Europe into crisis. All these factors are gravely increasing the risk of an upcoming recession.
Several global companies, including those that didn’t need to pause hiring during the pandemic, have announced hiring freezes and layoffs. Fresh graduates from reputed universities are landing jobs that pay much below par. According to Crunchbase, over 40,000 tech workers in the US have been laid off since the start of 2022. These events have sparked worry and anxiety among the working class.
Data from CNBC projects that several industries will be impacted. But the tech and financial services industries are preparing to brave the worst. Aggressive hiring during the pandemic and periods of rapid growth have forced companies to announce layoffs and hiring freezes and rethink their strategies to combat stagnating growth.
As a tech professional, taking stock of the current climate and acting upon areas that are in your control are key to minimizing the impact.
The purpose of this post is to help you understand what happens during a recession. We’ll also talk about what big tech CEOs have to say about the current economic environment, how you could be impacted, and what you should do to prepare yourself for the impending recession.
- What Is a Recession, and What Causes It?
- What Happens During a Recession?
- How Long Does a Recession Last?
- When Was the Last Recession?
- Are We Heading for a Recession?
- How Has Recession Impacted Hiring in Tech Companies?
- How Can You Prepare Yourself for the Recession?
What Is a Recession, and What Causes It?
A recession is a prolonged economic downturn caused by a sharp slowdown in business activity, hyperinflation, uncontrolled government debt, or the collapse of a country’s economic infrastructure. Recessions significantly impact governments, companies, businesses, and consumers. Jobs become few, supply chains are interrupted, prices of essentials go up, and economies shrink.
A recession is typically caused by:
- Steep demand drops
- Supply chain disruptions
- Economic shocks
- Uncontrolled government debt
- Decline in manufacturing activity
What Happens During a Recession?
A recession fundamentally happens due to a combination of many other conditions. For instance, inflation would’ve already hit an all-time high, businesses would’ve already started experiencing severe growth slowdowns, and supply chains would’ve been significantly impacted.
In order to acclimate to the new conditions, businesses are forced to reallocate resources, lay off workers, and scale down production to mitigate their losses. That’s followed by higher prices, extremely low demand for non-essential commodities and services, a steep decline in purchasing power, and fewer jobs, severely impacting working-class professionals.
How Long Does a Recession Last?
A recession can last anywhere from a few months to a few years. The effects can last much longer. The magnitude of a recession depends on the severity of the factors driving it. For instance, unrestrained recession coupled with stagnant economic growth can cause supply chain disruptions, throw prices of essential items out of gear, and stall crucial economic activity, leading to a recession. If governmental measures to reverse the downturn aren't effective enough, the effects of the recession can last longer than anticipated.
While most recessions in the past have lasted roughly 1-2 years, the effects have lasted at least 4-5 years. Even after it formally concludes, businesses take years to regain pre-recession growth momentums, usually leaving long-lasting effects on:
- The financial health of governments
- The average income of citizens
- Currency values
- Forex reserves
- The rate of employment
According to data from the US Employment Commission, over 60% of workers rendered unemployed by the 2007-08 recession took an average of 18-30 months to regain employment.
When Was the Last Recession?
There were two significant recessions in the last two decades — 2008-09 and 2020.
The COVID-induced recession after the first quarter of 2020 saw global GDP decline by a whopping 19.2% (source: Wikipedia), one of the sharpest economic declines after the Great Depression of 1929. Over 50 million people lost their jobs, and tons of businesses were swept away by its aftereffects. Some companies, however, warded off the effects of the pandemic by readjusting their processes. Tech companies became the beacon of the new-age transformation that introduced remote work cultures across the globe.
Before the COVID-induced recession, the recession of 2008-09 served as a grim reminder of lurking vulnerabilities in global economic infrastructures. Called the Great Recession, it lasted almost two years and saw millions of people losing their jobs and being pushed into poverty. Fuelled by a severe mortgage crisis at top banks, the Great Recession resulted in the global economy declining by almost 7% (source: Wikipedia).
Are We Heading for a Recession?
Given the current global economic climate, the risk of a global recession in 2023 is rising. Going by the technical definition of a recession — two consecutive quarters of negative GDP — the US entered into a recession in the Summer of 2022 (Forbes). CEOs of top companies, including Google, Tesla, and Facebook, have reiterated concerns about a lurking recession right from the start of 2022.
In a recent statement published by CNBC, JP Morgan CEO Jamie Dimon said the US will likely tip into recession in the next 6 to 8 months. He also said the US economy is still doing well given the domestic and global economic climate, and consumers are less likely to be as impacted as the 2008-09 recession.
The Current Market Situation
The markets were sent into a tailspin soon after COVID hit. Although the recovery has been somewhat steady over the last 1-2 years, inflation is at an all-time high in most economies. Central banks worldwide hiking interest rates to alleviate the situation has done little to bring inflation under control.
The war in Ukraine has aggressively spiked gas and oil prices in Europe. Economies of several countries are facing significant challenges, mostly emanating from increasing costs of commodities and a marked fall in the purchasing power of money.
A lot of market indicators are pointing to an impending global recession in the ensuing months. CEOs of several top companies across technology, manufacturing, financial services, and other sectors, have publicly expressed concerns about the looming recession, announcing hiring freezes and layoffs in upcoming quarters to combat the downturn.
We are in the throes of a distressing economic climate that can impact our lives.
How Has Recession Impacted Hiring in Tech Companies?
Several tech companies, regardless of their size, have put the brakes on hiring.
Google’s CEO, Sundar Pichai, recently stated that “sunnier days” at Google are over, and the company needs to rethink its employee policies (including hiring) to offset growth downturns. Netflix has lost a ton of subscribers to stiff competition from its rivals. Government regulations are challenging Facebook’s advertising and business policies. According to a Bloomberg report, Facebook CEO Mark Zuckerberg recently announced that the company is freezing hiring and planning to reduce its headcount in the coming year.
Twitter CEO, Parag Agarwal, in a recent town hall meeting, said the company’s spending and costs were more than its revenue. Twitter also reported “disappointing numbers” for the last financial year. “If I had to bet, I’d say that this might be one of the worst downturns that we’ve seen in recent history,” he said in a weekly employee Q&A session last month (Reuters).
Similarly, Tesla CEO, Elon Musk, in a recent event at QEF, said, “I think a recession is inevitable at some point. As to whether there is a recession in the near term, I think that is more likely than not.”
Why Have Tech Companies Slowed Down Hiring?
While some companies have cited operational slowdowns and lack of demand during the COVID pandemic, others attributed over-hiring during periods of rapid growth as the reason. But from analyzing hiring data and growth figures from top tech companies including Twitter, Microsoft, and Facebook, it seems that companies have slowed down or paused hiring because they aren't growing as much as they once were.
So technically, reducing expenses by toning down hiring aligns with logic at the moment.
Amazon reduced its headcount by 100,000 after almost doubling in size during the COVID-19 pandemic. Meta made a massive bet on Metaverse and excessively hired for roles. Netflix is losing big time to merciless competition from peers in the digital streaming space.
Shopify recently laid off 1,000 employees, almost 10% of its workforce, citing sharp slowdowns in business activity. Microsoft, in a recent announcement, said that it was laying off additional workers in a bid to counter the slowest revenue slowdown in the last 5 years. Google, Facebook, Microsoft, Airbnb, and several other big companies have announced layoffs in the coming quarters.
Interestingly, although some of these big companies have announced layoffs and trimmed their workforce, they're still hiring for some roles.
Which Tech Companies are Still Hiring?
Following is a list of companies still hiring for tech roles (as of October 2022):
Some other companies that are actively hiring for tech roles include
- Intel Corporation
Startups also continue to hire smart and talented tech professionals. Data from Underdog.io shows promising hiring trends in the startups landscape:
- 37% increase in the number of jobs added in the last quarter
- 49% increase in open engineering positions
To take advantage of these promising hiring trends in the current climate, it is critical that you upskill yourself and be fully ready when the opportunity strikes.
For more information on startup hiring trends, read Amid Recession and Layoffs Scare, Startups Continue to Hire.
How Can You Prepare Yourself for the Recession?
Anticipating a recession is one. Preparing for it is another. Given how things can turn out, here are some things you can do to shield yourself from the grave impacts of an impending recession.
Check Where Your Employer Stands
Knowing the status of your employer and the extent of exposure to a recession-like situation is important. If your employer is vulnerable, you ought to rethink your game plan and perhaps upskill and look for greener pastures.
Here’s what you can do:
If your company is cash-rich and you’re doing well in your role:
- You don’t have to start looking for opportunities
- Remain interview prepared and upskill in areas that pertain to your role
- Take more responsibility at work and make yourself indispensable
If your company isn’t in a good position:
1. Start preparing for interviews at companies that are more stable. Some of these companies include:
- FAANG companies
- Companies funded in Q4-21/Q1-22/Q2-22
- Companies that are hiring for Cybersecurity, Machine Learning, Data Science, and Cloud Computing, as these roles are still very much in demand
2. You can also:
- Take up contract jobs because companies will pay contractors well in this economy
- Take this chance to relocate geographically to places where the cost of living is low. Look for remote work options to save on spending and expenditure
- Apply to startups: Many large companies of today started during recessions
Upskill in Your Area of Work
There’s nothing more important while preparing for a recession than upskilling. As a matter of fact, upskilling and expanding the scope of your professional skills is the only way to navigate the economic downturn.
While you consider upskilling, make sure you choose the right skills to upgrade. Spend adequate time developing skills that aren’t obsolete and have strong long-term value.
Pay Off Your Debt and Avoid Investing in Risky Instruments
Don’t let your debt pile up. Make large chunks of payments toward clearing off your debts and avoid getting into debt in the coming months. Also, while it is important to invest regularly to ward off the impact of inflation by growing your money, avoid investing in risky financial instruments, especially futures, options, and dicey stocks.
Spend Less and Save More
Cut out unnecessary spending and focus on saving. Moreover, given the progressive increase in commodity and essential-items prices, spending on things that aren't needed makes no sense.
Networking is a great way of getting inside information about companies before it’s released to the public domain. It will help you figure out which companies are hiring for which specific roles. Knowing about the hiring status at different companies first-hand and getting interview referrals can be a big game changer.
Getting an interview and not being prepared can prove extremely costly. Preparing for interviews is perhaps the most important thing you can do. Start prepping and keep applying for jobs at more stable companies. Sharpen critical interview skills, including DSA problem-solving, system design, domain concepts, and behavioral skills.
FAQs on How to Prepare For the Recession
Q1. What are the main factors for recession?
A recession is the result of many economic factors playing out simultaneously over a period of time. Some major factors that cause a recession include hyperinflation, supply-chain disruptions, slowdown in business and manufacturing activity, and uncontrolled government debt.
Q2. What are two key indicators of a recession?
The two key indicators of a recession are - drop in real GDP numbers and rise in unemployment.
Q3. What should you do to prepare for a recession?
Here’s what you should do to prepare for a recession: Prepare for interviews at bigger companies that can ride the recession wave, upskill and make yourself indispensable, pay off debt, spend less, and avoid investing in risky instruments.
Q4. How long does a recession last?
A recession can last anywhere from a few months to a couple of years.
Q5. What happens when there is a recession?
During a period of recession, inflation increases, demand steeply drops, manufacturing crumbles, government debt shoots up, unemployment drastically increases, and poverty becomes rampant.
Q6. What to do before a recession?
The best way to prepare for a recession is to be interview-ready. If your company or role is vulnerable, prepare to crack interviews at more stable and cash-rich companies that continue to hire even during periods of low economic growth.
Q7. What are 3 key things that are happening during a recession?
Three key things happening during a recession are - drop in GDP, lower consumer spending, and rise in unemployment.
Q8. Who is most affected by recession?
Consumers and businesses are most affected by recession. Some industries most impacted by recession include travel/tourism, retail, hospitality, real estate and manufacturing.
Q9. When did the great recession end?
The great recession ended in 2009. It lasted from December 2007 to June 2009, for roughly one and a half years.
Q10. Are we in a recession yet?
In a recent statement published by CNBC, JP Morgan CEO Jamie Dimon said the US will likely tip into recession in the next 6 to 8 months. CEOs of top companies, including Google, Tesla, and Facebook, have reiterated concerns about a lurking recession right from the start of 2022. On the other hand, going by the technical definition of a recession — two consecutive quarters of negative GDP — the US entered into a recession in the Summer of 2022 (Forbes).
Get Interview-Ready and Recession-Proof Your Career
Upleveling during this time is key to cushioning the impact of this widely anticipated recession. There are several roles for which top companies are still hiring and will likely continue hiring.
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If you too want to uplevel and make your career recession-proof, register for Interview Kickstart’s FREE webinar to understand the best way to prepare for tech interviews at the biggest companies.