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What Is a White Collar Recession?

A white-collar recession occurs when companies eliminate white-collar jobs faster than blue-collar jobs. The trend may occur before or during volatile or declining economic movements, such as a recession.   

White collar recessions, explained

White-collar workers operate in skilled professions that require little to no physically demanding labor. White-collar workers often boast higher educations and salaries and more opportunities for upward advancement. 

These office- or remote-based positions include attorneys, financial professionals, insurers and management roles. You can contrast them against blue-collar skilled or unskilled laborers in the manufacturing, service, transportation or farm industries.  

What is a white-collar recession?

When recessions loom, decreased product and service demand may drive up unemployment risk.

But a white-collar recession occurs when companies lay off white-collar workers in larger numbers than their blue-collar counterparts.

The layoffs may begin before or during economic downturns that make eliminating jobs more financially prudent when weighed against potential PR downsides. 

What drives white-collar recessions?

In broad strokes, white-collar recessions occur when companies downsize to remain financially viable. The need to reduce workforces may be driven by one or more overlapping factors like:

  • Rising inflation
  • Higher interest rates
  • Lower company- or industry-wide profits
  • A recession or depression that hits white-collar positions harder
  • Improved automation allowing companies to rely on mechanical or software labor

These firms don’t have to operate in white-collar industries, either. For instance, manufacturers may lay off only office or middle management positions, contributing to the overall white-collar recessions. 

The 2022 white-collar recession

The most recent white-collar recession occurred in 2022. 

While blue-collar industries struggled to meet employment needs, many white-collar firms had over-hired during the pandemic. As inflation and interest rates rose, they could no longer justify burgeoning employment costs against declining growth. 

As a result, tens of thousands of white-collar positions were axed in 2022. The tech industry was hardest-hit, shedding over 51,000 jobs in November 2022. Meta alone laid off 11,000 employees in a week. 

But it wasn’t just tech. Layoffs also ticked up in the banking, real estate and media industries. White-collar middle management positions at prestigious firms like PepsiCo and Cisco were also eliminated. Many “pajama pants occupations,” or remote-only positions, saw greater layoff risks, too. 

How does a white collar recession affect you?

White-collar recessions present unique career risks to workers. Consider protecting yourself by:

  • Brushing up your resume
  • Going on the job hunt preemptively
  • Boosting your emergency fund for hard times
  • Cutting costs by:
  • Delaying major purchases
  • Switching to generic brands
  • Eliminating non-essential expenses like memberships or subscriptions

By preparing early, you can hit the ground running if your job is axed next.  

What this means for you

White-collar recessions can also impact your investment portfolio as the market responds to increased uncertainty. In turbulent markets, it’s essential to remember that investing is a long-term play. That means you should stick out your strategy – even if you readjust your asset allocation in the process. 

But if that sounds like a lot of work, consider an AI-backed, automatically adjusted portfolio instead. Q.ai’s artificial intelligence predicts, tracks and adapts to market volatility and investment trends for you, so you can leave the hard work to the data experts. 

Disclosures

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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