There’s been ongoing chatter about a US recession for months now, with speculations surpassing borders and reaching international news outlets. More recently, Elon Musk himself announced Tesla would lay off 10% of its workforce after publicly stating his belief that the US is heading toward a sure recession.
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With one IT leader so convinced of a US recession impacting the IT industry, what are the probabilities of these speculations coming to fruition?
In this article, we’ll explore the possibility of a US recession happening by the end of the year or the beginning of 2023 and hitting the IT sector. Keep reading to learn more about a potential US recession and how to lower your development costs in preparation for it.
What are the signs pointing towards a potential US recession?
A recession is when a country hits two consecutive quarters of declining GDP, but the United States is already ticking off some of the pre-recession signs we’ve seen before. Now, while economists and different industry leads continue to warn about a potential US recession, many Wall Street higher-ups insist these fears are being blown out of proportion.
Truth be told, the familiar precursors of a recession, such as rising interest rates, an inverted yield curve, and high inflation, are already displayed in plain sight for everyone to notice and worry about them. On top of these signs, there’s also the ongoing conflict between Russia and Ukraine and the lingering effects of the COVID-19 on the US economy.
There’s already a fair share of economic turmoil in the country – leading many to believe that a recession is coming. With a sharp decline in the GDP from 2021’s last quarter growth of 6.9% to a current forecasted 1.5% growth, things aren’t exactly looking up. Add to that declining GDP an inflation rate of 8.6% and it’s easy to see why many have entered the fight or flight mode.
How could we witness a US recession impacting the IT sector?
Selling pressure on IT stocks.
After enjoying the advantages of the roaring bull market in 2021, it seems like 2022 might just put an end to the digital transformation celebrations. NFTs, the Metaverse, and other innovations aren’t sufficient to counteract the growing selling pressure on IT stocks all across the globe. The selling pressure and value decrease of IT stocks will undoubtedly cause the tech industry to take a punch, but this doesn’t mean your company should slow down tech operations or forget about its IT sector altogether.
The Great Layoff.
Remember when The Great Resignation hit the country in 2021? Well, tables have turned quite a lot since then, with companies now downsizing their workforces due to recession concerns. This tech Great Layoff has now become evident with actions taken by industry giants. Meta and Twitter have both publicly announced hiring freezes, Tesla has laid off 10% of its employees, PayPal has fired dozens of workers, and Snapchat has said it would be slowing down new hires due to missing revenue targets.
Increasing wariness from investors.
If your company is within the IT sector, you might want to prepare for a slow investing season. It wouldn’t be crazy to see a US recession impacting the IT industry from an investing standpoint. As the economic climate becomes tougher to navigate, investors will hesitate before deciding to bet on your business.
Minimal impacts on the demand environment.
While a slowdown in economic growth can definitely decrease sales, a US recession impacting the IT industry by drastically affecting the demand environment is unlikely. Yes, sales will slow down a bit. But that doesn’t mean your company will be out of business or should go back on its digital transformation plans. The world still needs efficient development solutions and innovative technologies.
Are you looking for less expensive coding solutions? Consider IT staff augmentation!
While there are enough reasons to have growing fears of a recession, this doesn’t mean we shouldn’t be looking for smart solutions. The US has yet to experience another recession and there’s sufficient time to prepare for one, as some say it’s almost inevitable.
One of the best ways to prepare for an economic crisis is to cut down on as many costs as possible. As far as development solutions go, this can be achieved through IT staff augmentation.
What is IT staff augmentation? Well, while we have a complete IT staff augmentation guide on our blog, we’ll also share some of the details here. IT staff augmentation is an outsourcing strategy where you hire nearshore developers for a lower price than what it would cost to hire local talent.