My in-box filled with questions after I posted a Recession Fears Loom blog. Readers asked how I made sense of the different views voiced by economists and politicians. As a law office manager with responsibilities around staffing and profitability, you are probably watching to see which way the economy goes.
Here’s the background, and my answer to “are we headed into a recession?”:
Some say “yes.”
Over 60 percent of the 750 CEOs surveyed by the business research firm Conference Board expect a recession in the next 12 to 18 months1. Another 15 percent of surveyed CEOs report their region is already in recession.1
The most recent gross domestic product report that tracks our overall economic health showed a second consecutive quarter of negative growth, the textbook definition of a recession.2
Some, including some politicians, insist “no.” They point to the fact that U.S. employers added more than half a million new jobs in July and private-sector payrolls now exceed what they were in February 2020. As a result, national unemployment is 3.5, a half-century low.
Employers that say “yes” are laying off large numbers of employees. Re/Max slashed 17% of its national workforce. Peloton, Carvana, Ford and Better have each laid off thousands of employees. Walmart, Wells Fargo, 7-Eleven, Shopify, Netflix, and JPMorgan have all cut hundreds of jobs.3,4 Microsoft implemented a hiring freeze and cut both contract worker pay and hundreds of contractors.5
Two blog readers asked: Why has our unemployment rate decreased? Isn’t that an indicator there won’t be a recession?
Unemployment rates have decreased partially because so many have left the labor force during the pandemic to become self-employed, or gig and contract workers. Additionally, according to the July employment report, the number of employees working part-time increased by over 300,000, to 3.9 million. Part-time work, part-time wages = problems when we’re slammed by with the highest inflation in four decades, though luckily inflation now seems to be edging downward.
Also, jobless claims are edging higher.6
Here’s what I think. The indicators those who say “no” point to might not mean what they once did. But if the Federal Reserve and other decision-makers reassess what’s going on in light of labor force changes, they might be able to head off a recession.