To a business, a recession is a time to tighten your belt. Budgets that normally expand from year to year get cut during a recession. Sometimes a company has a hiring freeze, so that positions go vacant for longer than perhaps they really should.
I remember how many empty desks I saw in 2002. In some companies, as many as 20 percent of job positions were vacant as the company slowed down hiring. The organizational chart might have showed 325 positions, but with 65 of them marked “Vacant.” There was a desk in place waiting to be occupied by the person hired for the vacant position. But with budgets being squeezed, the companies were extremely selective about who they hired, and it took two or three years to fill some of the vacancies.
The empty-desk quality of a recession is a factor that allows for a snap-back recovery. As soon as revenue starts to flow again, the company can expand just by filling its vacancies faster. In some cases, it is as simple as making the phone call to offer the job to a qualified candidate who has already been interviewed for the position.
There are some empty desks in the current recession, but the empty desks have not expanded the way they did in recent recessions. Just the opposite, in fact. From all the statistics I can find, there are fewer job vacancies now than in normal times. Employers are slowing down hiring, but jobs aren’t going vacant. How can this be?
The answer is simple and sobering. Employers are eliminating job positions faster than they are hiring new workers. And they are not just taking away a job here and there, but slashing whole departments and locations. Factories and stores are closing at the fastest pace ever recorded. A business can usually wait out a recession, and many businesses are taking that approach this year, but many cannot and are restructuring for survival. That’s why there are so few empty desks.
With few empty desks, it may not be possible for the economy to bounce back from this recession. It takes longer to create a new job than it does to fill a vacant job position. Even with an empty desk, it typically takes weeks to hire someone to fill that spot. But in many cases, creating a job means writing a business plan, selecting a location, arranging for financing, renting an office, getting furniture and networking put in, and then starting to interview job candidates. Even if the business need is urgent and the money is in the bank, this is a process that can easily take a year or two — three or four, if a new building has to be built. The longer time scale for adding jobs means a slower recovery.
Other economists have already predicted that this could be an “L-shaped” recession, with the current rapid decline in economic activity followed by a very gradual recovery. Those predictions were based on such factors as the banking crisis, government deficits, and household debt. The dynamics of the job market point to the same conclusion. The economy can stage a quick recovery from a recession when there are millions of empty desks to fill. After positions are eliminated, facilities closed, and companies liquidated, the process of economic expansion is not quite so simple.