In the end, inflation may lower the boom on the hiring boom.
Despite the robust economy, experts say at least some business leaders are growing concerned about the rapid rise in inflation and last week's eye-popping 1,000 point drop in the Dow. Throw in talk of sooner-than-expected interest rate hikes—which were confirmed by Federal Reserve Chairman Jerome Powell just this week—and some firms may decide to rethink at some of their hiring blitzes. “Some organizations may take fright and pull back,” says Benjamin Frost, a solutions architect in Korn Ferry’s Products business.
To be sure, that sort of reversal might affect more hiring plans later this year than now, since companies still need to catch up with growing consumer demands. What's more, the resiliency of this year's economy has been remarkable so far, with the stock market, for example, already recovering most of the losses it experienced last week.
Any potential uncertainty is in many ways reminiscent of the early days of the recovery, when companies were hesitant to hire at the outset because they weren’t sure how fast the economy would return, only to be forced to play catch-up after it came back quicker than anticipated. A great many companies are in that position now, scrambling to hire people to cure supply chain bottlenecks and help meet demand. While companies have hired back about 14.5 million workers through May, that is still roughly 8 million fewer than the more than 22 million people they laid off or furloughed at the beginning of the pandemic.
Up until now, the result has been a significant shift in the balance of power toward talent. With job offers coming as fast as five days and sometimes with multiple offers to choose from, competition between companies has given workers the ability to dictate terms. People are turning down offers that require going into the office, and experts say bidding wars for key slots are becoming common. “You have people making more than their boss’s boss,” says David Vied, global sector leader for Korn Ferry’s Medical Devices and Diagnostics practice.
Indeed, while current conditions likely won’t turn off the hiring spigot entirely, they could impact talent’s ability to dictate terms and level the playing field with employers, if not tilt the balance of negotiating power. “Longer term, there will be a correction to alleviate some of the hiring pressure on companies,” says Bill Sebra, global operating officer for Korn Ferry’s professional search and recruitment process outsourcing businesses.
At the very least, for those companies that still need to hire, inflation and interest rate concerns are likely to force them to keep a lid on salary expenses, says Nathan Blain, a Korn Ferry senior client partner and the firm’s global leader for optimizing people costs. He says companies will need “real discipline” to keep salary and wage growth contained, which could impact hiring plans. “That is going to be the hardest thing to manage,” says Blain.