Surviving the White Collar Recession

This is not the time to be cute with your job...

April 05, 2024

984 Words | 4 Min 6 Sec Read

Welcome to another issue of Passionate Income.

Today we’ll be discussing how to navigate the ongoing white collar recession. A phenomenon marked by layoffs and tight hiring conditions in the knowledge worker sector, while jobs in the service/blue collar sector explode.

Let’s dive in.

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A couple days ago I found out my sister's husband was laid off from a tech company without severance. At first they'd given him a 30-day notice, but ended up laying him off 10 short days later.

Unfortunately, this is a reality many white collar employees / knowledge workers are facing right now.

To highlight the situation, consider the following stats:

  • As of one year ago, job openings in the tech space ​were down​ 55%, while openings in banking were down 40%

  • Monthly job gains ​averaged​ 190,000 in 2023, down more than 50% from the 399,000 average seen in 2022

  • 262,000 tech workers were laid off in 2023, coming in 59% than 2022

  • A 2023 Pollfish ​survey​ of 1,000 knowledge workers show 64% have lost trust in the stability and security of full-time employment

Long story short, it's a tough time to be a knowledge worker.

At the same time, one could argue now is the best time in history to work in the service sector, trades or most any kind of blue collar job. Here's why:

  • From February of 2021 to November of 2023, the services ​showed​ non-stop - and in some cases extreme - growth

  • 60% of blue collar workers believe they can retire comfortably, while 63% believe their economic situation will improve in the future

  • Of the 303,000 new jobs ​announced​ as part of today's job report, 232,000 came from traditional service sectors with the other 71,000 being government jobs

  • As part of the same report, full-time positions fell by 6,000 while part-time positions exploded by a stunning 691,000

As you can see, it's a Tale of Two Cities in the labor market.

If you work in the service sector or trades, and are happy with your job and income, odds are you don't need to do a darn thing. While hiring has slowed relative to 2022 and 2023, there's no indication you'll be facing layoffs or wage decreases/stagnation anytime soon.

On the flip side, if you work in the tech/knowledge worker space, you may be one of the 2/3 of workers that are highly concerned about their job security.

So what should you do?

First and foremost, create a backup plan.

Whether that's building up some savings in case of a layoff, updating your resume and networking with others in your industry, starting a side hustle or all of the above, don't stick your head in the sand and pray nothing bad happens.

While the industry appears to be on shaky ground, it's not like we're facing the type of mass layoffs you'd see during a recession let alone depression. In fact, relative to the numbers seen during late 2023 and January of 2024, the February 2024 ​numbers​ already show an improvement.

Second, assuming you don't want to be laid off, do everything you possibly can to secure your job. From learning new skills to sucking up to your boss (cringe but potentially necessary), a bird in the hand is better than two in the bush.

Relative to the job-hopping mania we saw in 2021 and 2022 - most of which was fueled by employees holding the power position as a result of COVID lockdowns - employers have ​regained the upper hand​ in the labor market.

From forcing people to return to the office, to "​quiet layoff​" strategies that involve cutting benefits and pay to the point employees quit on their own, this is not the time to get cute with your employer.

As many people in the investing industry are saying, the goal is to "​Survive until 2025​."

Meaning, the economic turmoil we're seeing is likely to last through the end of next year. Because of that, now is not the time to job hop in search of big pay jumps, higher bonuses, etc.

Sure, if you have something rock solid lined up, go for it.

If not, however, buckle down and try to ride things out until the labor market and general economy improve.

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💡 Takeaway: White collar workers are being laid off while service and blue collars workers experience a boom. While it's not fun, this is a natural pendulum swing after the knowledge worker sector exploded post-COVID.

And because of that, things will eventually return to normal (before entering the next growth phase). Until then, your goal is to create a backup plan and do your best to survive.

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