Mechanical Engineering During An Economic Downturn

We have been receiving numerous messages regarding the current market and its impact on MechEs, so we thought we should write a page on it!

The Questions:

• Why didn’t I get a return offer?

• Why hasn’t the recruiter gotten back to me?

• It seems like companies aren’t hiring, is that true?

• Why is the full-time recruiting process taking so long?

We can’t answer this question for your specific situation. But, we can dive into what’s going on and the impact it is having on the hiring landscape for MechEs.

The Economic Outlook

We aren’t Economists 👨‍🏫 or Finance Bros🕴, but here is our 3-bullet summary:

1. Covid hit in 2020 causing markets to crash temporarily, but the Federal Reserve quickly pumped tons of money into the economy (think those stimi checks you got + infrastructure spending), temporarily averting a crisis. Fun fact, 80% of the US dollars in existence were printed in the last 2 years!

2. As a result of the stimulation and near 0% interest rates (Federal Funds Rate), companies were able to expand (they could borrow money at nearly 0% interest rates), stocks shot to the moon, and inflation soon soared (+ add a war in Europe to the cards).

3. Throughout 2022, the Fed has been raising interest rates shockingly quickly (hoping to tame inflation). The latest CPI (consumer price index) report indicated inflation is still at record highs, and it’s causing companies to scale back and focus on avenues that drive profit over growth.

Return Offers

Let’s start with return offers. You did an amazing job this past summer at XYZ Inc. All of your feedback was positive! Congrats! However, when you asked about a return offer, you got something along the lines of: “We will let you know by ___ date about a return offer.” That date was probably at the end of September before they sent another email delaying offers between 1 and 3 months. Why?

Let’s look at it from the company’s perspective. Usually, return offers are the best kind of offers. The company doesn’t have to pay a recruiter to go find someone and engineers to interview them. They already have 3 months of data on your performance, derisking any chance the engineer is a dud. Usually, It Is A No Brainer . . . except when a recession could be on the horizon. The company has no idea about headcount 8-10 months from when they are expected to send out a return offer (aka now). What if there aren’t any new projects? What if the company needs to cut headcount by then? Is it worth giving someone an offer only to have to rescind it before they start?

Coinbase laid off 18% of its employees and rescinded offers this past June, deservedly receiving tons of bad press. People chose Coinbase over getting PhDs, and some had visas that were dependent on their employment. Rescinding offers or commencing layoffs are potentially the worst possible situation for a company, and can really hurt its reputation (as well as the employees counting on them).

So, what are they left to do with the solid bunch of interns they had last summer? Delay, Delay, Delay. More than likely, the company wants to hire you as an engineer, and a year ago they would have! But things have changed, and they can’t make any commitments yet. And so, they dance. From their perspective, the best case scenario is to string you along, convinced that a job offer is always on the horizon, until 1 of 3 things happens:

1. The economy improves!

2. They eek out some headcount and make you a below market offer (which you are likely to take since they successfully convinced you not to apply anywhere else and now it’s too late in the recruitment cycle so you’ll feel pressured to accept).

3. As late as humanly possible, when they can say without a shadow of a doubt that they won’t be able to hire anyone soon, they tell you that there is no job offer incoming (unlikely to happen until the end of 2022).

None of these scenarios are both optimal and likely. You, as the candidate, need to play the field even harder than usual to get the dream job in such circumstances.

Full Time

Full-time roles for seniors graduating in Spring 2023 suffer from similar issues as return offers, but to an even greater extent. If a company cannot issue return offers for intern conversions, they are unlikely to hire other new grads (it’s possible they are still hiring for more senior positions). Some companies will still grow their workforce despite the conditions. However, any high-quality candidate who didn’t get a return offer is now faced with applying to full-time positions and this makes everything more competitive.

Add in the fact that recruiters are usually the first employees in a company to be let go when the future looks uncertain, and you are left with long timelines for full-time applications, interviews, and offers.

It doesn’t benefit companies who have invested resources into interviewing qualified students to reject them, so they will try to string applicants along as long as possible. As an applicant, this can be super frustrating. The best way to escape this long back-and-forth would be to present them with another offer. We have seen timelines for interview-to-offer turn from weeks to ~3 days when confronted with competing offers. Scarcity drives demand.

So where do you look for companies that are hiring?

Well, probably not Meta, Oracle, or Google. They all have announced different forms of hiring freezes. (it is still possible specific teams might be hiring).

Tesla cut 10% of their workforce this summer and it seems like they are back to hiring . . . but it’s definitely at a slower rate. Any company that has announced “slowdowns,” means that they are either hiring explicitly for senior level roles or higher, or that only specific teams are hiring. If that company has laid off employees in the last year, their “slowdown” is almost certainly a hiring freeze (note Elon’s companies are exempt due to his notoriety for “trimming the fat,” even in times of economic prosperity). Use those LinkedIn connections to find potential teams that are still hiring! Tesla and Apple are known to still be giving out offers to engineering new grads at this moment in time.

If what is best for you is to get a job ASAP, your best bet is to go after older, large companies like Procter & Gamble (P&G), General Motors, Caterpillar, or 3M. They aren’t as impacted because their stocks aren’t dependent on multi-digit revenue growth every year.

One trend that can help MechEs is that military spending doesn’t go down during recessions so defense companies are still hiring. The 5 large contractors: Lockheed Martin, Northrop Grumman, General Atomics, Raytheon, and Boeing. There are also a handful of large startups in the space: Anduril, Shield.AI, Epirus, and of course SpaceX (not really a startup, but also not publicly traded).

It really is a grind. The situation right now sucks, there’s no way to sugarcoat it. Don’t get discouraged, and don’t be surprised if the economy bounces back and companies start hiring new grads as late as April or May. It all depends on the markets.

An unorthodox (but not unheard of) approach: You can also apply for an internship for the summer after you graduate, and then hope to turn it into a full-time offer after you finish. Note that some internships require you to have education left when you intern, so you may need to enroll in graduate school if you go this route. Whether or not you actually go to graduate school is another matter. Please also realize that this is somewhat risky, and that if the economy doesn’t improve or your team isn’t hiring for any number of reasons, this option may not work in your favor.

The final option on the table is higher education. We’ll come back to that later.

Internships

If you are an underclassman looking for an internship, you’re in luck! Internships aren’t usually super hampered by an economic downturn. Interns are cheap. Companies don’t have to commit to long contracts, expensive benefits, etc. Instead, they get a short-term, inexpensive labor source (every employer’s dream).

That being said, if recruiters get cut, it can definitely take longer to get through the recruiting process. Furthermore, some companies may not want to focus on hiring summer interns right now, so the regular recruiting season may be pushed back into the winter and spring. Use our LinkedIn Trojan Horse strategy, and if you are targeting startups, look for ones that raised money in the last year. They are likely to have a sufficient runway and will be looking for cheap labor to further their mission.

Cast a large net and expect the process to play out over a longer period of time than usual.

Graduate School

Another option on the table is graduate school. This can be a good chance to get more education because the opportunity cost of not working is lower. If there isn’t a ton of wage growth and fewer opportunities for bonuses and promotions, coming out of school with a master’s degree can result in more pay long term!

If you don’t have a full-time job lined up, hedging your bets by applying to grad school can also make sense. Why not have it as a backup if things don’t work out? Most graduate school applications are due in November, so get those letters of recommendation now if you need them.