In the weeks and months to come there will be a lot of speculation as people attempt to predict the shape of employment in the face of a possible economic downturn.
Economists are forecasting a recession, yet while there are lessons that we can learn from previous downturns, the current labour market is different and there are unique features.
Can past recessions inform the future?
Graduate employment slows down in a recession, with many employers cutting graduate programmes as well as internships. Some go as far as to put training programmes on hold.
Students and graduates typically lose faith. They don’t think that there are jobs, so engagement and applications are low. Heads are turned towards further study, an area where we usually see numbers soar as graduates put off job hunting with the view that there will be rosier times ahead.
Graduate unemployment rises and there are myriad media articles questioning the value of higher education. The labour market continues to be tough with jobs on a downward trajectory for several quarters, before slowly getting back on its feet.
A unique situation
The fallout of the pandemic is still evident in the graduate labour market, so we would be entering a recession in not quite “normal” conditions.
At the outset of Covid-19, employers made a great many cuts to programmes. This was relatively short-lived – by spring 2021 we started to hear about labour shortages.
At the start of the year the Institute of Student Employers (ISE) reported that the graduate jobs market had fully recovered with the number of vacancies 20 per cent higher than in 2019 before the Covid-19 pandemic.
Overall, there are currently still more vacancies than unemployed people, and so long-standing recruitment difficulties do not look likely to significantly ease at present. ISE has just reported that around one in ten graduate vacancies are unfilled and 40 per cent of employers are finding it difficult to fill graduate jobs.
This means that it would be the first time that we would go into a recession with a persistent labour shortage. With current labour market figures showing that the workforce is shrinking at the same time that vacancies are falling, we don’t really know how this unusual set of circumstances will affect demand.
What does this mean for graduates?
The latest graduate jobs data (ISE October 2022) showed employers are acting cautiously and slowing down recruitment, but vacancies are still increasing, albeit slowly.
As we move further into the year, assuming a recession becomes more real, we would ordinarily assume a falling off of graduate recruitment. However, I expect that it will far from cease entirely.
With the pandemic so very fresh, it is hard to imagine that employers, who cut jobs and then struggled to meet business demand as the situation improved, would make the same mistake twice.
We also shouldn’t underestimate the important role highly skilled workers play in the economy. The more qualified always do better in a downturn.
The pandemic is a good example of how graduates fare in a crisis. The recent Graduate Outcomes data showed the fortunes of graduates who left university in 2020 – the toughest employment environment that we can remember. This was the height of Covid, yet when they were surveyed in summer 2021, the vast majority had got jobs, and good jobs at that.
Similarly, the ONS study of graduate labour market outcomes during the pandemic showed that graduates on average are less likely to experience unemployment than non-graduates.
Of course, all things are never equal, and some graduates fare better than others. It is not always those in the arts who come off worse, but rather those in fields most exposed to large reductions in spending, such as engineers and construction workers. That said, these are often the first to benefit from an upturn in recruitment.
Supporting students and graduates
We mustn’t overlook the confidence, motivation and wellbeing challenges that come with a downturn. These issues have dominated the responses to our annual student surveys over the past few years – indeed, mental health and wellbeing were the top two concerns of students from all stages in this year’s survey, more important even than getting a job.
We have in place an emergency package of careers advice and guidance that focuses on building confidence and motivation. Our communication in a crisis focuses on highlighting that opportunities are still available. We help employers to manage their expectations about candidates.
While the shocks of a recession would be different, they would be no less profound.
Yet employers will continue to recruit graduates whatever the situation in the coming months. It’s important that we come together to ensure that graduates are equipped with the skills that businesses want as well as the ability to articulate and demonstrate them. It is those graduates who will remain in demand. We all have a part to play.