Many U.S. companies have been cautious about hiring this year amid fears of a looming recession.
The vast majority of U.S. businesses believe a downturn is about to begin, and many executives are planning based on recession expectations. 98% of American corporate CEOs predict that the U.S. economy will begin to decline within the next 12 to 18 months. In order to prepare for the “winter”, many technology companies and investment companies have announced a recruitment freeze.
With confidence in the economy plummeting, many companies are turning away from hiring permanent workers and looking instead at workers who can accept short-term contracts.
The number of short-term and contract job postings posted by U.S. companies rose 26% from May to November this year compared with the same period last year, according to data from the recruitment website LinkedIn, the Financial Times reported on Thursday. It is a sign that companies are increasingly eager to cut costs as economic forecasts for 2023 become more pessimistic.
The Boom of the Gig Economy
Facing the expectation of economic downturn, major enterprises have invariably increased the use of short-term contract workers, which is also in line with the general trend of the gig economy becoming more and more prosperous in recent years.
Since the outbreak of the epidemic, many traditional work structures have been disrupted, people’s interest in temporary employment has surged, many people have joined the gig economy in order to survive, and many companies have begun to use short-term contract workers to make up for labor shortages.
From 2019 to 2020, short-term contract workers hired by businesses with more than 25 workers increased by 24.5%, according to human resources software platform Gusto. Between 2017 and 2021, the proportion of short-term workers over long-term workers rose 48%, bringing short-term contract workers to about one-fifth of the workforce.
Since the outbreak, the scale of freelancers has continued to expand. According to a recent survey by the freelance recruitment website Upwork, there will be about 55 million freelancers in the United States in 2020, and the current record has reached 60 million. The survey also shows that in the past year, nearly 40% of workers in the United States have engaged in short-term contract work, contributing about $1.35 trillion to the economy.
Since the beginning of this year, the hyperinflation in the United States has made life more difficult for many workers. Many people have lived a life of “moonlight clan” and have to do odd jobs to earn some extra money. According to a study in April this year by the US payment service provider Branch, nearly 60% of people were forced to work odd jobs this year due to inflation.
What Matters in a Recession
The gig economy has seen a resurgence over the past few years as businesses cling on to short-term contracts in anticipation of a recession.
Beauty company Alleoop, for example, planned to hire 15 permanent employees next year. However, the company’s founder David Manshioli told the Financial Times that the company now plans to limit permanent employees to “key positions”, while the remaining positions will be filled by freelance or contract workers.
In June, Jason Chirwood, managing director of recruitment platform MarketerHire, told Marketing Brew that as recession fears intensified, businesses were increasingly favoring freelancers over permanent staff.
“They’re all worried about a recession. For them, the more part-time workers they hire, the less risk they have of layoffs and the safer the business,” he said.
A November study by payments and fintech company PYMNTS showed the gig economy will continue to grow next year, with “double-digit growth” expected in the number of freelancers and contract workers. (Fortune Chinese website)
Translated by: Park Sung-gyu
US companies chose to play it safe this year when it came to hiring amid fears of an imminent recession.
The vast majority of US companies are confident that an economic downturn is on the way, and many executives are planning accordingly. A full 98% of US CEOs expect a recession to start within the next 12 to 18 months, and many tech and investment firms have announced hiring freezes to prepare for one.
With confidence in the economy plummeting and recruiters less likely to hire permanent workers, companies are turning to employees who don’t require a long-term commitment.
The number of openings for contract and temporary roles posted by US companies between May and November this year surged by 26% compared to the same period last year, the Financial Times reported Thursday based on data provided by recruitment platform LinkedIn. It’s the latest sign Companies are increasingly eager to cut costs as clouds gather over the economy for 2023.
gig economy boom
Companies’ decision to turn to contract workers ahead of an expected economic downturn adds another chapter to the boom the gig economy has experienced over the past few years.
The pandemic fueled an explosion of interest in temporary employment, as the traditional work structure was upended and many joined the gig economy out of necessity, while companies also turned to contract workers to make up for labor shortages.
Companies with more than 25 employees saw a 24.5% growth in contract worker hires between 2019 and 2020, according to data from HR software platform Gusto, while the number of contractors for every employee grew by 48% between 2017 and 2021, of the Contractors to all employees was around one in five.
Freelancing has only kept growing since then. The number of gig workers in the US has grown from 55 million in 2020 to a record 60 million today, according to a recent study by freelance recruiter site Upwork. Almost 40% of the US workforce has done contract work in the past year, according to the study, adding around $1.35 trillion to the economy.
Soaring inflation this year has made it harder for workers to make ends meet and forced many US employees to live paycheck to paycheck—pushing many to turn to contract work for some extra cash. Nearly 60% of people who joined the gig economy earlier this year did so because of inflation, according to an April study by payments provider Branch.
Recession priorities
The gig economy’s reinvention over the past few years comes as more companies become open to contract workers ahead of an economic downturn.
Beauty company Alleyoop had planned to add up to 15 permanent employees to its team next year, but company founder David Manshoory told the FT that they were now limiting permanent hires to “key roles” and relying on freedom or contract workers to fill out the remaining roles.
As recession fears grew this year, companies have started hiring more and more freelance workers instead of permanent hires, Jason Chitwood, general manager at hiring platform Marketer Hire, told Marketing Brew in June.
“They’re worried about recessions,” he said. “For them, the safer they can be and the more folks they can bring onboard who are not full-time employees, the safer they are in terms of having to reduce their risk of layoffs,”
The gig economy is likely to keep growing in 2023, as payment platforms specializing in freelance and contract hires are expecting “double-digit growth” in the number of these workers next year, according to a November study by payments and fintech company PYMNTS.
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