February 1, 2023

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Corporate America Is Sounding the Alarm on the Economy

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(Bloomberg) — Corporate America is ratcheting up its warnings about the US economy.

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Executives from Jamie Dimon and Elon Musk to Gary Friedman, the head of furniture retailer RH, all cautioned investors this week to be wary of an economic downturn. After months of strong consumer spending and supply-chain improvements, some of the country’s most outspoken corporate leaders have started intensifying alarms about decades-high inflation and impending interest rate hikes.

“We’ve got a long ways to go in raising interest rates to fight inflation,” Friedman said on RH’s earnings call Thursday. “And I think you just have to be prepared for anything right now.”

Musk reportedly told employees at Tesla Inc. this week that he has a “super bad feeling” about the economy and needs to cut 10% of jobs at the electric carmaker, according to Reuters.

The tone contrasts with Friday’s jobs report showing bigger-than-expected payroll gains. And economists still see the chance of recession as unlikely next year, even if the odds have crept up. A Bloomberg survey estimates a 30% chance of recession in the next 12 months, up from 15% in March.

Rick Rieder, global fixed income chief investment officer at BlackRock Inc., said on Bloomberg Television that the employment numbers for May are likely “the last solid report you’re going to get for a long time” as the pace of hiring slows.

Meanwhile, growth at US service providers moderated in May to the softest pace in over a year, reflecting a pullback in a measure of business activity that suggests supply constraints.

The sense of doom has been especially evident in the banking sector, where Dimon told investors this week that they should be preparing for an economic “hurricane.” Last month, he said “storm clouds” over the economy may dissipate.

“That hurricane is right out there down the road coming our way,” the JPMorgan Chase & Co. chief executive officer said…

2022-06-03 12:07:32

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