Despite a strong U.S. labor market, several indicators are pointing to a shallow recession in 2024, a Conference Board economist told the more than 500 attendees at WorldatWork’s Sales Comp’23 Event Monday in Chicago.
“We certainly don’t expect it to resemble past recessions at this point,” said Selcuk Eren, senior economist at The Conference Board. referring to the Great Recession of 2008-10 and the dot com bubble in the early 2000s. “It should be a bit of a soft landing, which will trigger the Federal Reserve to lower interest rates and from there we should start to see some of the jobs lost coming back.”
Eren acknowledged that he and other economists have been predicting a much more serious recession for 12 months and that hasn’t come to fruition.
To provide context to what a “soft landing” looks like, Eren said unemployment would likely land somewhere around 4.2% in early 2024. It currently sits at 3.5%.
There is a direct effect on sales compensation professionals, because the retail sales sector has been among the most affected by the pandemic.
“There are longer term effects at play here with changing spending habits,” he said. “Retail jobs are dwindling because people are shopping online, and the pandemic accelerated that even more.”
Remote Work
Another indicator of the job market cooling, Eren said, is wage growth among job switchers and job stayers. During the past two years, the gap between those two increased significantly, with people leaving for new jobs receiving a median 8% increase in compensation compared to a median of about 4% for those who stayed at their organizations.
More recent data, Eren said, is showing wage increases for job switchers dropping as the labor market cools off and more layoffs are occurring.
Despite this, many organizations are still dealing with labor shortages and struggling mightily to fill these roles, Eren said. When asked the cause, Eren said one factor at play is in-office requirements for jobs. Just as consumer habits shifted more online and less in-person, worker habits did as well from the pandemic. Thus, people are less likely to take a job that requires them to be in the office or to move to another part of the country for a job. So, there’s a shrinking in the talent pool, especially at higher-level jobs, he said.
“People demand work-life balance,” Eren said. “They want to spend more time around family and friends, so any jobs that do not provide that are going to struggle with labor shortages. This is a challenge right now in healthcare.”
Eren added that “people typically don’t hate their job or their co-workers, they hate their commute.” Underscoring that as the recession effects start to materialize, organizations will need to be increasingly flexible, or they will feel the brunt of the labor shortages and economic ramifications that come with a slowdown.
Work-related travel, as Eren and other sales compensation practitioners in the room acknowledged, is commonplace for salespeople, many of whom are consistently on the road to close deals. However, from a macroeconomic point of view, it’s implications on company performance can be felt by sales teams.
Thus, it’s incumbent upon sales compensation professionals to adapt to their own organizational environment and provide sales plans and incentives that capture these potential long-term economic effects to maintain sales performance.
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