The escalating US-China tariff war, the slowing growth in countries like the US and Germany, the Chinese debt crisis and the controversial Brexit are only some of the many trends creating a fear that global economic recession might be just around the corner.
Economies globally are showing signs of acute weakness; the biggest of the industries are slowing down and if we are to believe Morgan Stanley, the global economy will be entering into recession in three quarters.
US China trade war & its impact on the global economy
The International Monetary Fund has shared that the trade war between the United States and China is already triggering a global economic slowdown. According to the group, the US-China tariffs, including those implemented and announced, could potentially reduce the level of global gross domestic product (GDP) by 0.8 percent in 2020, with additional losses in future years.
In fact, the GDP of the world's largest economy, US, slowed to 2.1 percent annualized growth in the second quarter.
The US-China trade tensions put pressure on the Southeast Asian economies as well. According to reports, five of the region's six major economies – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, saw slower growth than in January to March. Thailand and Singapore are the most to suffer as they face falling demand for their key manufacturing exports, such as electronics.
The Indonesian economy, expanded by just five percent, the Thai economy by 2.3 percent and Singapore's by 0.1 percent.
The Ministry of Trade and Industry cited, "The Singapore economy is likely to continue to face strong headwinds for the rest of the year."
The central banks in Indonesia, Thailand, the Philippines and Malaysia have already cut interest rates in a bid to bolster their economies. But are these measures enough? And how far they can help in mitigating the impact economic slowdown is creating on the labor market?
Rumbles of the footsteps of approaching global recession
Banks across the globe have announced more than 48,500 job cuts this year. While Deutsche Bank tops the list with 18,000 job cuts by the end of 2022, others like Spain’s Banco Santander SA, HSBC Holdings Plc and Barclays Plc in the UK, and France’s Societe Generale SA are slashing thousands of jobs as well.
There have been layoffs in other industries as well. General Motors announced its plan of cutting around 350 jobs in Thailand. Investment banking company UBS has eliminated more than 150 support jobs around the globe in the last few months. Most recently, Internet media company Rooster Teeth laid off 13 percent of its staff, the first big round of layoffs in the company’s history.
In India, a few sectors like the automobile industry are dangerously close to recession. Approximately two lakh jobs have been cut across automobile dealerships in India in the last three months as vehicle retailers take to reducing manpower to tide over the impact of the sales slump, as per the industry body, the Federation of Automobile Dealers Associations (FADA). Further, Parle Products, one of the largest biscuit makers in India, shared its plan to cut 10,000 jobs across the functions amid slowing economic growth and falling demand in the rural belts of the country.
Preparing for global recession
With the escalating fears of global economic recession, the current and the emerging workforce seeks to protect their jobs, while the companies want to safeguard themselves from the crippling effects of the recession on earnings. There are no guaranteed ways for the workforce to protect their jobs during a recession; however, there are a few common practices that might be helpful to face the troubled times looming ahead.
Continuous learning: Irrespective of which sector one belongs to, it is important to build awareness and knowledge of the trends shaping the entire global economy. To ensure that they are not caught in a rather unpleasant surprise, the workforce should be familiar with how the economy is shaping. Further, they should deliberate as to how these trends will impact their sector and change the demand for the skills and capabilities. With an awareness of the world, their own sector and their own capabilities and interests, they should then identify their shortcomings and develop a learning path for themselves.
As the world of work become more complex and the economy further slows down, organizations will have to take some harsh decisions to reduce costs. The ones who are more adept and agile will be preferred over others.
“I feel irrespective of economic fluctuations an employee who doesn’t have consistent performance track record or have been lacking in demonstrating learnability is always at risk - more so when there is an anticipated downturn,” said Rituparna Chakraborty, President, Indian Staffing Federation.
Develop or harness adversity quotient: Adversity Quotient (AQ), coined by Paul Stoltz in 1997, measures the ability of a person to deal with adversities in his or her life. The world of work has always been unpredictable and the only ones who have been able to face and fight these complexities and found opportunities amidst challenges have been able to thrive. Many often give up before the crisis even approaches, while others put up a fight till the end. “It is crucial to have a winning mindset,” said Rohit Kumar, Director HR, Kellogg South Asia.
The workforce and the corporates of today can take a page from the journey of some of the companies which have actually thrived during a recession.
For instance, Lego, which witnessed a profit growth of more than 63 percent, reaching an all-time high of profitability. What it did differently was, it expanded its visions and while Americans were facing the worst of the recession, Lego expanded into Asia and made concentrated efforts to build sales in Europe.
Be Innovative: Innovation or out of the box approach has worked for many in previous phases of recession. In fact, innovation is something that will help the workforce as well as the corporates in the future, irrespective of whether global economic recession occurs or not.
“In my view rather than latching onto the narrative of potential job losses we should focus on innovation,” exclaimed Chakraborty.
Let’s take the example of Netflix, now the streaming powerhouse of the world. When recession hit in 2008, many companies in the entertainment space struggled to survive. But Netflix had managed to attract three million more subscribers by the end of 2009, with its stock price rising by 57 percent. Netflix had then latched onto the opportunity and provided less costly mode of entertainment to consumers. While the cable and satellite TV services, which were far more expensive, were struggling to maintain their consumer base, Netflix innovated and changed its strategy to acquire more customers. Its innovative approach was also paired with a strong knowledge of its consumers, competitors and the entire market.
Scope of gig economy in the times of recession
With most organizations looking to cut costs, permanent jobs might be slashed but there might be an emergence of more contractual work. Also, contingent and alternative employment might become more of a necessity for workers, increasing the supply of people willing and wanting to take these jobs. But while recession could leave more people looking for the gig work, it could also deflate the gig economy.
Advance Partners, a company that supports staffing agencies, warns that during recession, often the first to get affected are contingent workers. So, possibly how the gig workforce will suffer could be in terms of low wages and poor salary arrangements, but the supply and demand of such employees might continue to bolster the gig economy even amidst global recession. Although a global economic recession is not guaranteed, but even if it arrives, it does not have to be the end. The economies, the businesses and the workforce can build on their strengths, learn from each other and continue their endeavor to survive and excel.
“There is no failure except in no longer trying.” – Elbert Hubbard
Irrespective of sectors, it is important to build awareness of the trends shaping the entire global economy. To ensure that they are not caught in a rather unpleasant surprise, the workforce should be familiar with how the economy is shaping
- Is a global recession coming? Here are seven warning signs
- Global economy may face recession in 9 months, but not India: Morgan Stanley
- US-China trade war triggering a global economic slowdown: IMF
- Southeast Asia set for more headwinds after lackluster 2Q growth
- Deutsche Bank to let go dozens of traders & salespeople
- 2 lakh auto sector workers lost jobs in last 3 months: FADA
- You Can Beat the Next Recession: Here Are 5 Companies That Did Just That
- A Recession Could Be Big Trouble for the Gig Economy