Job Outlook: Time to Recalibrate

Firms were confident enough to set some bolder budgets and hiring plans. Now the latest data suggest it’s time to go back to the drawing board.

It only took a few weeks, but experts say many companies have begun to realize they need to throw out their early plans for 2021.

Just a few weeks ago, hopes were pretty high that the new national plan for the COVID-19 vaccine rollout would spark a strong economic recovery and lead to robust job growth in the second half of the year. Instead, a slowed rollout and new variants of the virus have put leaders right back to where they were at this point last year: rethinking business forecasts, pausing hiring, and considering layoffs.

After losing 227,000 jobs in December, the first monthly decline since the initial months of the COVID-19 outbreak, nearly 3.5 million people filed for unemployment in January, the highest monthly level since the summer. And while the economy did add 49,000 jobs during January, the gains are far from what economists and leaders hoped for. All of which is changing plans that had seemed solid, says Benjamin Frost, a solutions architect in Korn Ferry’s Products business. “Over the last four to six weeks, we have seen a bit of recalibrating over how fast the economy can get going,” he says.

The lesson, experts say, is that the time for more usual forecasting and planning is far off. Indeed, the signals continue to be mixed, with the Congressional Budget Office recently saying the economy will grow to pre-pandemic levels by mid-year while also predicting hiring will remain suppressed. Meanwhile, analysts say they still believe organizations will add between 5.3 million and 6.7 million jobs this year, making 2021 “the best year on record for job growth” since 1946.

Nathan Blain, a Korn Ferry senior client partner and the firm’s global lead for optimizing people costs, says leaders should brace for the possibility of big employment swings throughout the year. “It is very hard to predict economic activity for February, never mind the next four or five months,” he says. While the economy will grow this year, Blain says hiring, particularly for small businesses, will continue to be vulnerable to COVID spikes and changes in government support because financial reserves are already severely depleted. Conversely, while larger organizations will be more insulated from the pandemic, Blain says the need to accelerate digital transformation will result in continued layoffs, though not on the mass scale experienced last year. “Hiring and layoffs will be mitigated by the relative confidence employers have in the second half of the year,” Blain says. “As of right now, it is hard to be as confident as we were even a month ago.”

Of course, the employment outlook varies dramatically by sector. Retailers have been adding jobs back, though many of the new positions are hourly or temporary roles to help administer vaccinations in grocery stores or pharmacies. “We are starting to see contraction in senior-level retail roles and holding back of hiring for ‘nonessential’ roles,” says Denise Kramp, a Korn Ferry senior client partner and the firm’s North America retail sector leader. “Retailers don’t know if their 2021 projections can be met yet.”

By contrast, in the leisure and hospitality industry, leaders are cautiously optimistic that once the vaccine rollout reaches critical mass, it will unleash pent-up demand for travel in the second half of the year, says Radhika Papandreou, a Korn Ferry senior client partner and leader of the firm’s North America Travel, Hospitality, and Leisure practice. “Companies realize they need to have the right staff in place for when that happens and are already working on the roadmap for bringing back talent at all levels,” she says.