Heading into the holiday consumer season, many Americans are pinching pennies where they can, which has made the consumer industry take measures to counter the expected slowdown.
My family is no different than yours; we decided to scale back our Christmas shopping and have spent less time away from the house to save as much money as possible.
Giants of banking and business have been hinting and, at times, outright proclaiming that a recession is around the corner and will profoundly impact Americans regardless of economic status.
But Amazon founder and billionaire Jeff Bezos gave perhaps the most stark warnings and recommendations for Americans.
How bad could it get? It depends on who you listen to, but the outlook doesn’t look great either way they try to slice it.
In a recent interview on CNN, Bezos warned in no uncertain terms that Americans should stop spending their money. Keep in mind, this is a man who runs the biggest consumer clearinghouse on the planet.
Stating what we all already know, Mr. Bezos said:
“The economy does not look great right now.”
He went on to predict:
“The probabilities say if we’re not in a recession right now, we’re likely to be in one very soon.”
So, what words of wisdom did the e-commerce mastermind have for Americans? First, hold off on big purchases like televisions, large appliances like refrigerators, and vehicles.
It should give us pause and chills that the man at the helm of the platform most of us do our shopping on is telling us we should probably stop shopping.
But it’s not just consumers he warned. He advised small business owners like me to hold off on purchasing capital goods, like new equipment, and to focus on building up our cash reserves.
“Take as much risk off the table as you can,” he said. “Hope for the best, but prepare for the worst.”
It appears that Mr. Bezos has been reading some business tea leaves, and the picture they are painting is bleak.
One of the many telltale signs of impending recession is mass layoffs. As Mr. Bezos pointed out in his interview with CNN:
“Things are slowing down, you’re seeing layoffs in many, many sectors of the economy.”
Amazon isn’t immune to this phenomenon. They recently announced plans to lay off 10,000 employees, about 3% of its workforce, the most significant cut in the company’s history.
Recently fellow billionaire and space enthusiast Elon Musk slashed the Twitter staff, and Meta announced plans to cut 11,000 employees, equating to 13% of its workforce. But it’s not just the tech industry experiencing layoffs.
Peloton, which surged during COVID, had to lay off thousands of employees. Netflix and Shopify also have announced layoffs, and real estate company Redfin is planning to slice 13% of its staff.
While an impending recession does seem imminent, “experts” seem to differ on expectations.
Contrast that with the Bloomberg Economics Model, which announced a 100% chance that we will be in a recession next year. So are we, or aren’t we?
It depends on your definition of a recession. Generally speaking, most of us have always universally understood that a recession is when the economy shrinks for an extended time.
However, definitions these days seem to be much more fluid. So far, a recession hasn’t been officially announced by our overlords, even though we have had two consecutive quarters of negative GDP growth and rising prices across the board.
But is there light at the end of the tunnel when it comes to inflation?
While rising prices seem to be slowing down and, in some cases, slowly coming down, indications are that inflation is here to stay. As Chief Investment Officer at Carbon Collective Zach Stein explains:
“Even with the likelihood that inflation has peaked, inflation will still remain elevated for some time, as supply chain issues persist and there is still plenty of instability with the Ukraine war, which has caused significant swings in energy prices.”
So even if inflation isn’t predicted to get worse, it also doesn’t appear to be going away, which means a recession might not just hit us hard, but might stick around for an extended period. For example, Elon Musk tweeted that a recession could last into the “spring of ’24.”
Right now, the United States is in marginally better shape than its peers worldwide. The United Kingdom is actively in a recession, and even China’s growth seems to have come to a halt.
But when asked about his administration’s ability to stave off inflation, President Joe Biden recently said:
“…what I can’t do is, I can’t guarantee that we’re going to be able to get rid of inflation.”
How comforting. No Ronald Reagan, this guy.
This year we are choosing to celebrate a lean Christmas, so to speak. Of course, the kids will still receive plenty of gifts, but other family members and friends will get one or two, and that is all this year.
It appears we won’t be the only family practicing this concept. The National Retail Federation predicts that holiday sales will only see a 6% to 8% growth this year compared to 2020 when holiday sales grew 13.5%.
We are lucky; we receive multiple income streams thanks to our military service, small business, and my day job as your friendly and spicy political commentator. However, many aren’t as lucky as we are.
When faced with no job, healthcare, fewer hours, and fewer prospects for new hires, the impending recession could call for more drastic consequences than fewer gifts under the Christmas tree this year. But, unfortunately, I suppose all we can do is, as Mr. Bezos said:
“Hope for the best, but prepare for the worst.”
This year the Grinch might actually steal Christmas. Will our Grinch’s heart grow, or will the Grinch dig in for the long haul? Only time will tell.
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