Traditionally, the definition of a “recession” has been two quarters of negative growth, which, if you’ll remember, we took care of several quarters ago. At the time, the administration tried to put on a happy face and redefine “recession” and the pundits went mad. Here’s the thing, though: “A rose by any other name” would still be a recession, and with the rising costs of money, the slowing of important sectors of the economy, and a cooling real estate market, what else could it be?
If you check out business headlines, there’s a good chance that you’ll read that the sky is falling. Thing is, one day the doomsayers will eventually get it right. With 90 percent of chief executive officers predicting a recession, their fears may seem plausible.
Consulting firm KPMG conducted a survey quizzing 40 leaders at major American companies regarding their outlook. The results: 91 percent of CEOs believe that a recession will set in within the next 12 months. Worse yet, many fear it may take a long time for the economy to recover.
Unemployment goes up in a recession because there is a decline in trade and business activity. Of course, the irony is unemployment numbers have been falling in the post-Covid economy, simply because more people got back to work in 2022 and the backlog of work to be done and a pent-up need for consumer goods has meant shelves and warehouses weren’t overstocked.
Unfortunately, such dour sentiments may have morphed into a self-fulfilling prophecy. Roughly half of CEOs reported that they are planning layoffs, and a quick review of many top companies shows they have cut jobs. If business leaders move to position their organizations for a recession, such as instituting layoffs or reducing investments, it could create drag on the economy. This, in turn, could generate a self-sustaining feedback loop with a souring economy forcing companies to take even more drastic measures. There’s some good news, however. Many business leaders believe their company is now better positioned to deal with an economic contraction and, in many cases, they are sitting on a LOT of cash reserves to be able to make moves not linked to interest rates, but rather, opportunity
Sincerely,
