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March Economic Outlook: What 2023’s First Quarter Might Tell Us About the Rest of the Year
Several little stories may help you piece together what’s going on—and what’s coming—this year.
- Jobs, housing, and wealth are going through a redistribution cycle. That happens regularly in economies. The reshuffling immediately impacts housing markets and certain sectors’ job strength. It may have broad market implications for the future, but only time will tell.
- Economists often have competing theories about what’s happening now—and what will happen next. (They’re real people, after all.) But their theories don’t always hold up against unpredictable human behavior.
Time flies when you’re having fun … or watching the zigzag of 2023’s economic readout. Nearly three months in, a few pieces of the puzzle are stitching together for a picture that’s still incomplete but offers some trends and insights worth noting. Let’s recap, and try to make the outlook come into focus, even just a little bit.
Jobs Plus Housing Equals Redistribution in Real Time.
In last month’s economic outlook, we talked about the juxtaposition of lots of tech layoffs but strong employment numbers, a contradiction that continued in February. The job losses you’re reading about hint at something that happens all the time: redistribution.
Also important to consider: As a total share of the employment market, the tech sector is relatively small—just 2%. Those companies added a lot of staff during COVID shutdowns. But service industries—which shed jobs en masse during shutdowns? They make up a whopping 36% of overall private-sector payrolls. Those service companies have been trying (and struggling) to ramp back up to meet increased demand, especially over the last year. They’re not firing; they’re hiring—a lot. And the jobs added aren’t just front-office or front-line: Nearly every company needs people with skills like information technology, and many prefer to have talent on staff.That is redistribution at work, in real time—and it’s a trend that will probably continue in 2023. For example, take housing and its connection to recent tech layoffs. Housing markets up and down the West Coast are taking a hard hit.What else is central to places like San Francisco and Seattle? Tech, of course. Those puzzle pieces of jobs and housing will likely keep moving this year in ways that might feel contradictory. That’s neither good nor bad—but to be expected.
Your wallet: Are there any redistributions you need to make in your financial plan? For example, maybe an emergency expense set you back on debt repayment. Or, perhaps you want to funnel more funds into retirement savings but need to cut elsewhere to do so. Learn tricks to getting the most out of your paycheck.
Economics has lots of theories. Reality is more complicated.
Officially (and simplistically), the field of economics studies how resources, goods and services, production, and other factors like government intersect. So it’s not surprising that there are many competing theories within that field. Adam Smith, for example, is known as the father of free trade, while John Maynard Keynes advocated for government spending when economies were in a slump. Modern economists such as Alan Greenspan have also put a stamp on notions of how and why economic systems function.
One consistent critique of the study of economics is that it too often cannot fully consider the variability of human behavior. When “x” happens in an economy, “y” isn’t always the result, partially because people don’t always make decisions rationally or linearly. Take recent discussions of the probability of a recession: Many economists believed (or still believe) it’s a sure thing. But others have begun to shift that point of view. Some are closely watching wage growth: While there are still lots of jobs open, competition for some of those jobs is up, which gives employers more flexibility.
Should Employers Stop Requiring Vaccines Once the Pandemic Emergencies End?
Companies in some sectors, such as health care, may feel legally compelled to maintain vaccine requirements even after the pandemic’s public health and national emergencies end on May 11. But some employers may choose to drop the requirements because—as Susan Wiltsie, an attorney with Hunton Andrews Kurth in Washington, D.C., noted—vaccines are not as effective at preventing the spread of COVID-19 as public health officials originally predicted. In addition, a pending Supreme Court case may make it more difficult for employers to defend themselves against religious discrimination claims. There also may be pushback from employees if businesses try to maintain the requirements. Other employers may continue to require or encourage vaccination to help keep their workforces safe and healthy, Wiltsie said.
When Employers Might Choose to Keep Vaccine Requirements
Rules from the Centers for Medicare & Medicaid Services still require Medicare- and Medicaid-certified providers and suppliers to have mandatory vaccination policies. The final Occupational Safety and Health Administration rule for managing COVID-19 in health care is undergoing White House review and isn’t expected to include a vaccine requirement. Depending on the workplace, maintaining vaccine requirements may be a good idea, she added. Employers that might continue to require vaccination, depending on state and local laws, could include child care facilities and businesses in the restaurant and hospitality sectors, said Robin Shea, an attorney with Constangy, Brooks, Smith & Prophete in Winston- Salem, N.C. However, Michael Shimada, an attorney with Baker McKenzie in Palo Alto, Calif., cautioned that some states have outlawed public-sector mandates.
Requests for Religious Accommodation Have Been Common
Exceptions to vaccine requirements must be made for employees with reasonable religious- or disability- based accommodation requests, so long as they don’t result in an undue hardship. Shea said relatively few employees have sought disability-related accommodations, but many more have asked for religious accommodations.Distinguishing between valid and invalid disability accommodation requests is straightforward because the employer can obtain medical documentation in response to the requests, Wiltsie said. But “weeding out illegitimate religious accommodation requests is extremely difficult,” she said, noting that even employers that followed the Equal Employment Opportunity Commission’s religious accommodation guidance to the letter have been sued.
The Changing Nature of Exceptions to Mandates
Courts may or may not be receptive to claims that vaccine mandates were unlawful. The nature of what constitutes a reasonable exception to a vaccine requirement may be changing, based on what is now known about vaccines and the Supreme Court possibly making the standard for employers’ defense against religious accommodation requests more stringent. When defending an accommodation denial case under the Americans with Disabilities Act (ADA) or Title VII of the Civil Rights Act of 1964, an employer currently must establish that granting the request would impose a significant difficulty or expense for disability accommodations or more than a de minimis cost for religious accommodations. Although these standards are both referred to as “undue hardship,” the standard for showing an undue hardship currently is much higher for disability accommodations than for religious accommodations. When employers began implementing vaccine requirements immediately after vaccines became available, the understanding from public health officials was that most vaccinated employees would not get COVID-19 or would not carry a sufficient level of the virus to transmit it to others, Wiltsie said. In addition, COVID-19 treatments have improved significantly since the pandemic’s onset. Wiltsie said that cases originating from early in the pandemic will be the easiest for employers to defend. No matter when the decision was made to deny a religious accommodation request, the de minimis cost burden is relatively easy to satisfy, she noted. This may change if the Supreme Court decides this year to change the applicable standard for denying religious accommodation requests.
The court is considering whether to change the “undue hardship” standard in religious accommodation cases brought under Title VII from the de minimis cost standard to the more stringent “significant difficulty or expense” standard that applies in ADA accommodation cases. The high court is widely expected to switch to applying the latter standard to religious accommodation requests, Shimada said. If the Supreme Court does, employers will find it more difficult to justify denying an employee’s religious accommodation request, he noted. As for constitutional challenges against employers for denying religious exemptions, the 6th U.S. Circuit Court of Appeals on March 14 ruled that a company wasn’t a state actor when it sold products to the federal government and imposed a vaccine mandate because the government required it to do so as a federal contractor.
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.”
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- Posted by admin
- On March 17, 2023
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