A collage of negative economic news headlines instills job market anxiety in people represented by a golden paper cut-out of a person.

The Surprising Influence of Misleading Economic News on the Job Market

No matter how rational and logical we humans like to think we are, sentiment is a powerful force that shapes how we understand our surroundings and make decisions. In an era of click-bait headlines and fear-based media, the news has the power to influence the economic situation and the hiring environment— even when the media makes the wrong connections.

As the leaders of the economic landscape, employers can set the emotional tone for the economy, for better or worse. In this article, we’ll explore how decision-makers can block out the noise with data-driven hiring strategies and ultimately help create a more stable job market. 

A remote employee in a yellow turtle neck feels insecure about the future of the job market.

Media Misfires Have Economic Consequences

So, how exactly does the news impact a company’s hiring decisions? Similar to the stock market’s short-term fluctuations, researchers have found a similar correlation between sentiment and future economic activity when it comes to the economy at large. The more optimistic people feel about the economy, the better the economy does, and typically, when the economy does better, so does the job market. The opposite is true for negative economic sentiment. 

While there is nothing inherently wrong about consumers and companies taking smart, protective financial measures, a problem arises when the media sources behind economic worry are misguided. 

A striking example of the fallacy “correlation equals causation” happened over the summer when a major news outlet linked decreasing mortgage applications with inflation. While it is true that higher interest rates can dissuade people from applying for mortgages, the supposed direct correlation to the rising inflation muddied the current climate. 

The reality is that mortgage applications had increased steadily before decreasing over the summer —when inflation began to rise. This rise and fall in mortgage applications actually matches pre-pandemic housing patterns and may not, in fact, be reason to worry.  

An employer, confused by arrows on a wall pointing in different directions, symbolizes the challenge of making hiring decisions amidst conflicting economic news.

The news also fueled recession fears by marking an increase in layoffs and the summer’s decline in job openings despite the job market following typical summer hiring trends.

While it is true that there are more layoffs during recessions, the reason for this particular increase in layoffs may not be indicative of a weakening economy. The main industry seeing mass layoffs is tech, deemed a barometer for the entire labor market even when the tech industry has unique differentiators, which means it does not align with the market as a whole.

Many reports on these supposed industry-wide layoffs are also missing context specific to their application. One possible reason there have been so many layoffs in tech lately is that these companies were overstaffed during the pandemic. As life returns to normal, there is no longer a need for so many employees — hardly an issue applicable to every industry.

Despite this, such massive layoffs can be seen as red flags to someone outside the tech industry. Individuals who do not work in tech may aggressively start to save as if layoffs are infectious. Employers may hold off on expanding their teams in case these major tech companies have a secret insight into future economic movements. Both of which would be inappropriate responses to their own reality. 

Businesses can reclaim confidence by looking past the headlines, using data and expert insights to make better-informed choices, helping their businesses and the job market flourish long-term. 

An employer congratulates a new hire they found thanks to a stable job market

Smart Hiring is Guided by Facts, Not Fear

Nonetheless, it can be hard to block out the noise, especially when the noise is coming from a diverse set of trusted news sources. For employers to make smart hiring decisions, it’s important to focus on the facts, not the headlines. 

A great place to get the facts is straight from the source. The Hiring Advisors, for instance, has worked intimately with the job market for a decade, navigating the impact of different economic twists and turns. Any questions or concerns you have about new job hiring trends we can help shed light on, just book a consultation with one of our recruiters. 

Data is another powerful tool to combat misinformation. Looking at economic data, conducting internal business analyses, and measuring growth against benchmarks gives industry leaders a less biased snapshot of how reported economic trends can affect operations. 

Another strategy organizations can leverage for better hiring decisions is focusing on long-term plans. The economy is always changing, so prioritizing long-term goals rather than short-term reactionary actions will help sustain the company and the economy. 

By gathering unbiased information and making decisions that focus on the long-term health of an organization, employers not only set themselves up for growth and recession durability but also help improve the stability of the job market.

Building a Resilient Job Market

Ultimately, understanding how the media influences the economy gives employers the opportunity to make smart business decisions, strengthening the job market. The continuous negative and often incorrect connections the news can make between economic trends have the potential to become a self-fulfilling prophecy. 

If employers and consumers expect a poor economic turn, logic tells us everyone will prepare for it. Consumers will spend less, businesses will hire less, and the job market will become even harder for hiring managers and job seekers to navigate. 

Yet, when industry leaders rise above the doomsday headlines and use data, expert knowledge, and focus on long-term strategies, the job market can become a resilient ecosystem that withstands the shockwaves of negative economic sentiment, building sustainable and symbiotic employee-employer relationships. 

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