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February Economic Outlook: What’s Up with Jobs Data, & What Might Happen This Year?
- Your budget choices may bear more similarity to businesses’ budget choices than you realize. When you have excess funds, you have options; companies do too. Over the last few years, many invested in more people—i.e., filling or adding positions.
- Layoffs garner headlines, but the picture is less clear from one industry to the next. Many sectors are doing quite well in employment durability and may continue to exhibit strength over the next year.
For all the weird economic data of the last few years, one of the weirdest numbers has been the durability of employment. Since COVID-related shutdowns began to ebb, job openings have consistently outpaced job seekers. What might jobs-related information tell us about the economic outlook for the coming year?
Jobs data has a cycle, too.
We’ve talked a lot in the monthly economic outlook about economic cycles. Interest rates, inflation, spending, and gross domestic product—all generally happen in cycles. The same is true for employment. There are always upswings and downswings for hirings and layoffs—some shorter, some deeper. What’s unusual about this job cycle—let’s say from late 2020 to the present—is not just the sustained period of elevated job openings, but the sustained number of those openings. According to the Federal Reserve Bank of St. Louis, it’s never been higher. The reason is a straight-ish line from the unique circumstances in 2020.
Oversimplified, it goes something like this: Businesses, similar to individuals, have ongoing priorities, including saving, spending, or investing. Sometimes a company has extra funds—and sometimes not. When a company has less money, it pulls back on new purchases, debt payoffs, or growth; when it has more, the opposite is true. “The economic factors that influence a company’s decisions are, in some ways, the same that influence an individual,” says Heather Winston, director of individual solutions at Principal®. When COVID shutdowns began, many businesses’ immediate priorities and plans for excess funds changed overnight; yours probably did, too. Suddenly, company investments in facilities, for example, became largely unnecessary: Many more people were working from home. “Some companies didn’t have to pay for outflows of their operating capital to the same degree as they did pre-pandemic, so they had opportunities to make different kinds of investments—in some cases, people,” Winston says. Demand, of course, necessitated many of those job investments and much of the growth in wages: A delivery company or a construction firm had to ramp up to fulfill orders and compete for hires with every other company trying to do the same thing.
That delivered the hot employment market, and along with it, high wage growth, which has also helped fuel inflation. In 2023, companies’ priorities for their excess funds appear to be shifting again—which naturally leads to layoffs or a slowdown in hiring. Have we had too much growth in income and jobs? Inflation hawks (experts very concerned about interest rates) say yes; full employment fans (and those who finally received bigger paychecks) say no. Ultimately, the Federal Reserve believes it needs to weaken the demand for labor, but historically, that’s been a delicate process.
Your wallet: How did you spend money last year, and how might that change in 2023? There’s plenty of time at the start of this year to review and finalize your priorities—just like businesses across the country are doing now. If you haven’t been able to focus on managing your debt, for example, a snowball or avalanche strategy may help you pay off at least one bill this year.
PIPs: Write, Implement and Time Them Precisely
A performance improvement plan (PIP) is typically a step in a progressive discipline policy—one that shouldn’t be rushed into too quickly or used for all types of performance deficiencies. If the performance failure is a one-time event, it may be too soon to implement a PIP, said Katherine Rigby, an attorney with Epstein Becker Green in Boston.
Immediate termination may be appropriate for egregious misconduct. If implementing a PIP, employers should clarify the plan doesn’t change the at-will nature of employment. “A PIP should be used primarily to facilitate improved performance by identifying deficiencies while providing an opportunity for improvement and success,” said Timothy Ford, an attorney with Einhorn Barbarito in Denville, N.J. “At the same time, a properly drafted and implemented PIP can serve to justify legitimate business reasons for termination and provide evidence of performance-related issues and failure to improve.”
A progressive discipline policy often has four or five steps, Ford said:
- Coaching and re-establishing expectations.
- Verbal reprimand.
- Written reprimand.
- Suspension, which is not always appropriate.
A PIP is part of the written reprimand phase.
When drafting PIPs, the objectives should specify the employee’s areas of needed improvement and what the employer expects the worker to accomplish in a specific time frame, said John Connell, an attorney with Burr & Forman in Greenville, S.C. Include a specific and appropriate duration for the PIP, such as 30 to 90 days, Rigby said. “The appropriate duration should be aligned with business goals and will depend in part on the performance metrics that need to be improved and whether the duration is sufficient to allow the employee to accomplish the objectives,” she said. Identify the responsibility of the position, job expectations and what would be acceptable performance, Ford said. Then compare this to the employee’s current level of production.
“Identify the consequences if the employee does not meet the objectives, including termination.” Don’t set unachievable expectations, he cautioned. Don’t make the PIP and the objectives subject to interpretation; include measurable objectives. “Do not make it personal or identify anything other than professional responsibilities,” Ford said. Include confirmation that the employer has provided previous opportunities to improve with dates of prior coaching or corrective action, said Jennifer Long, an attorney with Duane Morris in Chicago. Consider including a statement that the employee must demonstrate “immediate and sustained improvement,” Rigby recommended. The PIP could note that the company may determine at its own discretion to end the PIP early if the employee clearly cannot or is otherwise refusing to meet the goals of the PIP, she said. HR needs to be involved to ensure the drafting of the PIP is consistent across the organization, Rigby added.
Regularly and accurately document the employee’s performance throughout the PIP with details on the date and examples of how performance has progressed—whether it has improved, stayed the same or deteriorated— Rigby said. “Obtain feedback from the employee about their performance and obstacles, if any, they have identified in progressing,” she said. “If the need for additional training and support is identified, provide that as soon as possible.” Be open to making changes to the PIP based on employee feedback, Rigby added.
Delivery of the PIP to the employee should be in a private meeting, preferably at the end of the day and at a time that does not interfere with a major work deadline, Long said. “The employee should not have to return to complete an urgent work assignment or to walk past an area full of co-workers at the end of the conversation when they may be emotional or upset,” she said. The manager should make sure they are available to answer follow-up questions from the employee, she added. The manager also should note the deadlines or time frames provided in the PIP to ensure the employee receives timely feedback on their progress.
Fast Termination Versus a PIP
An employer might prefer a fast termination instead of a PIP when the employee’s behavior, more than performance, is the problem, said Douglas Bracken, an attorney with Kane Russell Coleman Logan in Dallas. For example, when an employee poses a safety threat or has engaged in serious insubordination or work refusal, most employers will take immediate corrective action, including removal of the employee from the workplace or termination, Long said. PIPs are not appropriate for any unlawful conduct, including discrimination, Connell said. Once on notice of unacceptable conduct, the company may be held liable if the employee engages in the same conduct again, Bracken said. A PIP is not typically effective if the employer has already repeatedly counseled the employee on various performance deficiencies, and the employee clearly is unlikely to perform the required job duties, assuming there is no need for a reasonable accommodation, Rigby said.
The Costly Practice of Pushing Out Employees to Avoid Layoffs
By now, employers are very aware of the concerns surrounding the economic climate, and whether the winds of change look like a soft breeze or a category five storm, this is a good time for every business to evaluate where their money does the most good.
A new study by JP Morgan Chase found that over two-thirds of small to midsize business owners are anticipating a recession, which could lead to budget cuts and layoffs. At the same time, 59% of American workers are feeling at least moderate levels of burnout, according to research from Aflac. So how can companies invest their money this year in a way that keeps budgets tight, but alleviates strain on their employees? “This is so critical,” says Casey Bailey, head of people at Deel, a global payroll and compliance provider. “HR practitioners being burdened with all of these other things, from performance to scalability to technology, layoffs, hiring — now the budget is sitting there on top and we need to do more with less.”
A good way to start is by implementing technology solutions that could lift some of the mundane tasks off of HR’s shoulders, giving them more opportunity to make employee well-being their top priority. At Deel, this philosophy has helped them create a strong company culture within their quickly growing workforce as they move into the new year. The solutions they’re turning to need to be both easy to navigate and work well for the business’s bottom line. “Coming from the HR practitioner standpoint, the requirements that we have looking at our HR tech stack are going to be around cost,” Bailey says. “As we have more companies who want to see their full workforce analytics, it’s become critical to have that global approach — do I need to hire a consultant, or is my team able to do it ourselves because it’s so user friendly? Am I replacing three of my other vendors because now I can access everything in one consolidated place for my team?”
When HR is enabled with solutions that save them time and money, they can allocate those resources toward the biggest benefit employees (including themselves) are seeking: a better work-life balance. Bailey points out that while budget areas promoting the well-being and retention of employees should be tweaked if necessary, it is smart to do some research first.
“It’s important to make sure you’re understanding your workforce — the culture that exists, what’s important to people,” she says. “I always recommend that people do an engagement survey or have some other information to be as intentional and as proactive as possible. Understanding what [employees] are asking for and where you might better be able to meet them is sometimes at a lower cost to you than you were carrying on the books in the past.”
One of the areas companies are able to meet employees’ needs and see a solid return on investment is education. Bailey sees this as an area where workers who are put off by the rising cost of higher education will be seeking more practical options. Upskilling and training not only cultivates a strong and talented workforce, but reduces expensive turnover. “Continuing education that is specific to someone’s role, specific to keeping their licensing or accreditation or certifications, is important for what they do for you, but also important for them personally as they think about their career. How can we invest in the team and make sure that they’re continuing to learn, continuing to advance, and when they leave, they have marketability?”
Employees are also demanding flexibility in 2023 — a carry-over from 2022. Remote and hybrid work arrangements improve retention and recruitment, and are a low-cost way to signal that you trust employees to be productive from anywhere. Education and tech tools can also help empower both employees and managers to utilize the tools available to be successful. “Flexibility is the theme over everything,” Bailey says. “It goes back to the culture and so much is led by your management teams. It’s been beyond proven that people have been successful in remote environments, it opens you up to really good talent and it [improves] retention strategy to show that we’re giving you flexibility, and we’re celebrating it.”
This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.
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- Posted by admin
- On February 27, 2023
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