White-Collar Jobs More at Risk of Layoff in Recession Than Blue-Collar


  • Employees did significantly better than workers in the Corona crisis.
  • Several signs suggest that a Fed-driven downturn in 2023 will be the opposite.
  • Several blue-collar sectors are to be protected from layoffs, while white-collar workers are at risk.

The economic pain in the next downturn will be vastly different than that of the coronavirus recession. Office workers should worry.

A growing number of economists expect at least a mild recession to occur in 2023, and evidence suggests it will resemble the downturn of the early 1990s. That slump left white-collar workers — or high-income office workers — at increased risk of losing their jobs, while those in blue-collar sectors like mining and manufacturing generally fared much better than in previous recessions.

William Lee, chief economist at the Milken Institute, previously told MarketWatch that the recession would be primarily “a white-collar recession,” adding that “the blue-collar recession will not take place in the same places that we’ve seen in the past.” . “

Lee added to Insider that workers like truck drivers used to be the “most vulnerable workers,” but “office workers have always been considered protected.”

“Right now it’s the other way around,” he added.

This is partly due to the rise in automation across industries.

“The changes in business models and the introduction of software have really changed the landscape of the groups that will be most at risk,” Lee said.

For example, he said there was a demand for a warehouse worker who could do “automated robotic pickup and delivery” on a computer “because that worker is now a very skilled worker.”

White-collar sectors were quick to shut down in the wake of the pandemic and this could leave workers vulnerable in a downturn

Recessions come in all shapes and sizes. The Great Depression hit every American in one way or another between the Wall Street Crash of October 1929, dust storms, widespread defaults and bank runs. The Great Recession of the late 2000s left low- and middle-income households to bear the brunt of the economic woes. And the coronavirus recession primarily hurt service industry workers, while manufacturers were able to recover much faster.

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Sectors that normally employ white-collar workers, such as professional and business services and information, have more than fully recovered from the job losses seen at the start of the pandemic. As a result, these industries may have less room for growth or may have overexpanded during the pandemic and could struggle in a downturn.

“It has to be pretty obvious that those who have accumulated the most workers fastest are the ones that have to reverse that pretty quickly,” Lee said of Industries. “Because the rush to hire people was something that managers have tripped over themselves when looking for workers, thinking that companies will recover, the recovery from the COVID shutdown will take longer than we do now expect.”

In the typical blue-collar sectors such as leisure and hospitality, manufacturing, and transportation and warehousing, hiring and job recovery have not been equal, as can be seen in the chart below.

Interest rate-sensitive sectors are also more likely to shed jobs. Mortgage lenders, for example, face a serious risk of losing jobs if the economy and housing market slow further. Such companies experienced a “unprecedented situation” when home buying accelerated sharply and property values ​​skyrocketed in 2021 and early 2022, Julia Pollak, chief economist at ZipRecruiter, told Insider.

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The economic environment has completely turned around since then. The US Federal Reserve’s interest rate hikes have taken mortgage rates to their highest levels since 2008. This has reduced demand for homes and put the brakes on home buying. As rates rise higher and borrowing becomes more expensive, mortgage lenders and other interest-rate-sensitive industries are likely to turn to cost-cutting, Pollak said.

“This industry is in a kind of standstill and potentially a massive drop in activity,” Pollak added. “You would expect a very substantial drop in employment.”

Blue collar jobs are still in demand and need more workers

Some workers’ sectors have only recently recovered or are still on the way back. That leaves more flexibility to keep hiring and avoid mass layoffs.

But not all blue-collar jobs are fired in the same way. According to Lee, the energy sector has been hiring some workers “like crazy” as they struggle with labor shortages. However, Lee added, “As energy prices gradually rise and fall, many of these companies believe they may have hired too many people.”

The US has already seen layoffs from tech employers, but “one has to wonder how much of that is really future fears compared to corrections for overhiring in the last year or two,” says Aaron Terrazas, Glassdoor’s chief economist. insiders said.

The transportation and warehousing sector, which employs multiple worker positions, has grown during the pandemic. People sitting at home during lockdown were spending time shopping online and needing things delivered. The industry continues to see employment growth from pre-pandemic levels.

“There’s still a lot of demand and, more importantly, not enough supply when it comes to frontline workers,” Terrazas said, adding that that includes workers in places like airports and factories.

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Gastronomy experienced a similar effect. Employment in restaurants and bars has long been expected to increase in the 2020s as the population grows and the demand for food in restaurants remains constant. However, employment in the hospitality industry is still down about 630,000 jobs from pre-pandemic levels, according to the Bureau of Labor Statistics.

Not only do restaurants and bars need to win back those jobs, they also need to make up for two and a half years of lost growth, ZipRecruiter’s Pollak said. There are still around 1.3 million job vacancies in the hotel and restaurant sector, suggesting that the demand for labor is still there. The hiring pace may be slowing, but it’s likely that restaurant and bar workers will keep their jobs during a downturn in 2023, Pollak said.

“It’s more likely that growth will slow down for a while than that we’ll have massive layoffs in restaurants again,” she said. “People are sitting on a mountain of savings so they’re not going to dramatically cut back on restaurant spending.”

Thinking in employee and worker terms may not be enough for today’s job market, Terrazas says. He believes the workers most at risk right now are those in so-called “pyjama bottom jobs,” or jobs that can be done from home.

But most of these are the same employee gigs that have endured through lockdowns and various waves of coronavirus infections. After record-breaking job losses and a sluggish recovery, it looks like workers will fare better in the next slump.



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