When it comes to employment, the equation is usually simple:
High interest rates = workforce reductions to save on costs = higher unemployment
Lower interest rates = easier access to borrowing to expand = lower unemployment
We tend to see layoffs increase when banks announce higher interest rates, but what happens when rates are high and unemployment is low?
The question that our office is often wrestling with these days is how long will it take for a long-service employee to find new employment in these financial circumstances. The answer often lies in the employee’s education and skills at the time they were hired.
Employers might argue that a rockstar employee will easily and quickly find comparable alternative employment, but if they didn’t have certain academic qualifications when they were hired in their previous role, or if they didn’t gain sufficient clinical experience during their tenure, they won’t be successful when searching for work in industries where these are now prerequisites for hire.
Modern employment websites use AI (and less sophisticated filters) to screen out applicants who do not meet the prerequisites posted for the role. This means that employee job search journals will quickly fill with automated rejection letters where the employee does not have current qualifications. In the absence of mitigation, these employees who go to trial will get full pay in lieu of reasonable notice and costs, at minimum.
You may be wondering: what does this have to do with interest rates again?
Well, if current rates aren’t causing the desired loss of employment then interest rates will stay higher for longer or even go up, particularly in the event of further global supply chain interruption.
What is the labour market like in your industry? Are you being contacted by recruiters and offered signing bonuses with increased compensation? Are your sales way down and your employer is bringing you back into the office more days/week? Contact us for excellent advice.