Inflation and the Job Market: How the Economy Influences Hiring Decisions

Inflation was again making headlines last week as Jerome Powell, the Chairman of the Federal Reserve Bank, signaled that aggressive measures were called for in handling a surging level of inflation that hadn’t been seen in decades.

Inflation’s Catch 22 Affect on Key Industries

When interest rates are low, people borrow money and spend more freely. Real estate purchases go up, and so does credit card spending; money is “cheap.” Raising interest rates, like the Fed just did, is meant to mitigate the surge in prices, but in the process of doing so, it may make consumer think twice about buying a new car or other big ticket item.

We see this affecting the industries we work with in a number of ways, from planning to hiring. Here’s a look at what we expect during this uncertain time.

How Inflation Affects Luxury Retail

World events and the economy are setting up challenges for the luxury retail sector in 2022. Economic sanctions and political unrest are making major luxury retailers pull out of Russia. And in the US, luxury retailers are encountering a market where consumers might become a bit more reluctant to buy larger ticket items.

In such a scenario, we expect to see a premium place on brand-building and some experimentation in terms of reaching to younger consumers through resale markets. We expect companies to seek out candidates who can skillfully craft messages to younger consumers while still being able to burnish legacy brands with their most loyal and well-heeled fan base.

How Inflation Affects Food & Beverage

Inflation affects the food and beverage market by making consumers want to spend more time at home, cooking their own food. This can be especially challenging in the alcohol trade, as most companies make their best profit margins in on-premise rather than off-premise sales. In an inflation-driven economy, we expect to see more experimentation with subscription-based offerings and home delivery apps, as well as products that spend more time aligning themselves with certain lifestyle attributes.

How Inflation Affects Hospitality

Those in travel and tourism expect this summer to be a big season that is relieving two years’ worth of pent up demand for travel. That said, those in the industry fear that inflation may cause travelers to want to pitch pennies on accommodations or on retail purchases at their destinations. We expect employers to continue to hire in robust fashion, but also focus on those candidates who have a track record of extracting the most revenue out of any given opportunity.

How Inflation Affects E-Commerce

The pandemic sparked a surge in online shopping with so many people staying home more and looking for pastimes. Surging inflation may cause consumers to second-guess big purchases. Retailers may look to try bargain pricing and subscription-based models. The so called “cost-of-acquisition” may climb with surging prices.

In terms of hiring, retailers building their e-commerce portfolio will be looking for versatile players who can create online experiences that build brand loyalty and affinity.

Inflation Also Affects Salary Expectations

As employees encounter higher prices for everything from lunch to gas, they accordingly expect higher salaries from their employers. Another pressure on this dynamic is the so-called “Great Resignation” or trend of workers increasingly wanting to job hop for higher pay.

We encourage employers to offer a range of non-monetary compensation to entice their best workers to stay, but we are also realistic: money is the single most important factor in the negotiation process.