Layoffs too soon? Here’s why the Q2 jobs report is better than you think.
The Q2 jobs report offers many valuable but contradictory insights. Jobs are up, but average work week productivity is down. It’s not perfect news – but it’s not the bad news we’ve come to expect.
I’ve seen many ups and downs in my career. I believe that the latest wave of layoffs was an overreaction.
As a leader, you must understand: companies that are unwilling to embrace large-scale change risk being left behind. There’s a lot of change right now indeed. But there are also things you can do today to prepare your business for the upcoming rebound.
Let’s talk about the trends that I see.
Things aren’t so bad. They’re just less predictable.
The May 2023 jobs report was eye-opening: employers added a total of 339,000 non-farm jobs, far outpacing analysts’ expectations. Companies like Salesforce are crushing their numbers, with year-over-year revenue up 22%. And the annual inflation rate seems to be slowing – in May, we saw it at its lowest in 2 years.
But despite all that, every week brings yet another tech layoff. Why? It’s what companies traditionally do during downturns. But people must have short memories – because what about the last few years has followed tradition?
What this means for you
I believe this quarter’s job report contains something deeper than a story of missed expectations about jobs. It’s the start of something that could be big. Are you going to be ready?
Rethink, re-engage, reinvent
So many forces are coming at us at once. There’s the explosion of generative AI; the reckoning between the remote and the return-to-office paradigms; and not least, the looming shift away from full-time work and towards consulting.
Productivity is complicated
What about productivity, though? It’s down, and we can’t ignore that. There were two previous quarters of GDP miss.
Productivity is a complex and nuanced problem. Some of the problems stem residually from the pandemic lows; some, perhaps, from a culture that pivoted too hard into remote and hasn’t yet found its way in the new world.
Remote must be a strategic – not inertial – decision
Regardless, now is the moment to redefine how and where their people will do work moving forward. Remote vs. onsite must be a strategic business decision weighing culture, connectivity and the specific nature of your business to get your best work done. Your decision here must engage employees to jointly explore how to produce better work rather than continue a pandemic paradigm in a post-pandemic world. Because if you fail to address productivity, morale (boosted by isolation and a lack of real-life connection to the people you work with) will continue to suffer too.
This moment is an opportunity for leaders to re-engage with employees on the subject of productivity in a way that they could not do in the past few years.
New staffing models can help productivity and labor hoarding issues
It’s also the perfect time to explore alternative or flexible staffing models, such as engaging consultants or fractional roles. You can take advantage of the great talent newly on the market and reinvent how great work gets done at the same time.
One of the more contradictory insights from Q2’23” jobs report is the gain of “labor hoarding”, when businesses hold on to people in anticipation of future downsizing– and to the detriment of productivity. But what if you could bring in experienced specialists, ready to engage right here and right now, bringing new ideas? What if you could automate some foundational workflows with today’s AI technology and make room for a different way of showing up? For many post-pandemic workers, a “jungle gym” approach working on project-based initiatives and untraditional hours is a boon towards the flexibility they’ve come to expect – and they’re ready to produce and contribute in new ways.
As things change, you’ll need to redefine how you measure productivity too. You’ll need to think less about 9-to-5, and more specifically work to define what good productivity means for you. Why those numbers? How do you get there? What does it mean to engage or show up? How are you measuring your success?
What this means for you
Don’t let productivity problems fester. It’s a good time for you to step in and focus – not by doubling down, but by engaging with your team on productivity and its implications. Involve them in the solution that works for your particular business operating model. Experiment.
We’ve weathered storms of change before – only the weather was worse.
The last time I saw this many changes at once was during the dotcom boom of the 90s, where many tech leaders started their careers but lacked the foresight to understand the global implications of their work. In the dotcom crash, low interest rates gave startups what felt like easy money; but many large ones folded when capital dried up as their business plans, operating models, and products were underdeveloped. The crash was deep: more mature companies fell victim too, sometimes losing significant market value.
Yes, we saw several bank and company failures this year. But were they massive? At a global scale? Maybe… but not at the dot-com scale. These are smaller, more controlled failures that did not have the same profound global economic effect. It may not feel like it, but little by little, we’re learning.
Many voices say that generative AI could be the transformative shift unlike all others. I’m curious to see where that goes. Will most jobs be wiped out? I don’t think so yet. Some will be, but that’s not necessarily a bad thing. It’s another opportunity for evolution and reinvention. I see AI as having great potential to solve future problems – with population rates falling, will we have enough specialists in the future? Jury’s out.
What this means for you
We can look to lessons of the past for context, but I believe this tech recession isn’t a doomsday moment. Instead, we’re seeing a renegotiation of boundaries from an unprecedented last few years. It’s how we react to it today that matters.
What you can do now
- Uplift your team’s morale. Don’t neglect this. Your team is your most important asset. You must make sure that your team is on the right path forward by addressing residual morale problems from the pandemic, working in isolation, and industry layoffs.
- Embrace the changes. You can’t ignore AI and other new technologies that could upend how you do business – but you can embrace them and stay attuned. Explore how they could help you do business. Learn from others’ mistakes. Stay curious.
- Never stop innovating. Innovation always drives success in times of change, but don’t limit innovation to your product development. Innovate how you develop your team: lean into flexible staffing models such as contract or fractional hires. Bring in new strategies to solve problems that you haven’t solved well before.
I believe that change is fundamentally good. Only the people who don’t change are the ones whose journey stops where they are now. Whatever we’re in for, it’s going to be interesting!