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.