The U.S. labor market continues to be a major headache for business leaders. Despite the millions who left—or were forced out of the workforce during the pandemic—current job openings continue to outpace the number of unemployed individuals actively looking for work. In addition, low labor participation rates have contributed to less productivity and greater inflation, major issues plaguing the U.S. economy.
Looking ahead, leading economists expect the economy to sag in the first half of this year as quarantine savings that have cushioned many households are depleted, and those who stepped out of the workforce during the pandemic will begin job searching. We’re already seeing labor force participation rise slightly, according to the December U.S. jobs report that added 223,000 jobs.
But finally, some good news: The rise in labor force participation could mitigate the labor shortage and alleviate some of the building inflationary pressures. It’s worth watching how the Federal Reserve responds to these developments, as it will contribute to whether the U.S. enters a deeper recession or experiences a softer landing.
As the U.S. labor market continues to be a source of concern, companies must have strategies to navigate the challenges presented by inflation, the potential for a recession, and changing consumer spending patterns. Here are three approaches that can help businesses retain and acquire top talent, proactively adapt to changes in the job market, and stay competitive in a rapidly evolving business environment.
Now is the time to attract tech talent
Mass tech layoffs are only a part of the story. Other sectors outside of tech are ramping up recruitment efforts. It’s puzzling: If the economy is headed toward a recession, why are many industries still hiring and growing?
It’s because consumer spending on services—including car rentals, hotels, and transportation—is surging in demand as these industries recover from the pandemic. As a result, job opportunities continue to grow even as the economy slows down.
Industries like clean energy manufacturing, semiconductor manufacturing, pharmaceutical, and healthcare are also experiencing high levels of growth as they adjust to a new normal. Some of the fastest-growing occupations in data processing, hosting services, semiconductor manufacturing, mental health services, and pharma manufacturing are all experiencing an increase in demand—and wages.
With thousands of skilled tech workers open for work, it’s an ideal time for growing companies to make a strong case for those tech workers to jump industries.
Double down on upskilling high-potential employees
During a recession, companies may be forced to make difficult decisions about workforces, including implementing layoffs or hiring freezes. However, another path could be for organizations to focus on upskilling their high-potential employees instead of letting some go. This helps the business retain valuable talent, a top priority for CEOs in 2023, and prepares employees for new opportunities within the organization, positioning them for future success.
Investing in employee development can also help the organization stay competitive and adapt to market changes. In the long run, upskilling high-potential employees can lead to improved productivity, increased innovation, and a stronger, more resilient workforce.
To make this work, it comes down to how well business leaders understand their workforces — and their people’s skills. For companies to ensure they are strategically and effectively upskilling, leaders need deep-learning AI and skills intelligence to conduct skills assessments at scale, identify emerging future skills, and assign personalized upskilling and training plans.
Engage freelance workers to fill skill gaps
A third of HR leaders plan to increase their freelance budget in 2023. Supplementing the workforce with contingent workers can be a smart strategic move to help companies meet their workload needs, boost productivity, and get tasks quickly done—especially to meet short-term or urgent needs.
Fortunately, the supply of contingent workers looks ready to meet the demand. Eightfold AI’s analysis estimates a 25 percent increase in contingent workers in the U.S. this year.
Contingent workers are a valuable asset to any organization, as they can be hired for specific skill sets on a project-by-project basis rather than tied to the needs of a full-time role. This flexibility allows organizations to engage specialized expertise as needed, complementing the growing trend toward skills-based hiring. This elastic approach to talent will enable companies to fill skill gaps and meet workload demands more cost-effectively.
Sania Khan is the chief economist at Eightfold AI, the AI-powered platform for all talent, and the author of Think Like an Economist. She previously worked for the U.S. Bureau of Labor Statistics.
This article originally appeared on Fast Company in February.