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A Tale of Two Economies — In the words of James Bullard from yesterday morning live on Squawkbox, Recession is in the Eye of the Beholder.
If you listen to the White House’s Press Secretary KJP, any Fed president, or most mainstream media outlets, you will hear vehement denial of a recession.
There will be much to do about a strong consumer, huge savings rates during the pandemic, and lots of liquidity on the average American’s balance sheet.
I find it especially bizarre to hear from Daddy JPow that interest rates at this point in the game are close to neutral and that we are not in a recession. For the uninitiated, this means that interest rates are high enough that they’re not “accommodative”—they don’t encourage borrowing or excess spending.
Indeed, public-facing voices from the government’s perspective are in a mode in which delivering assurances about a healthy state of the economy is the modus operandi. My response to most of these bureaucrats: have you listened to a f*cking earnings call?
Businesses, by their nature, operate in the real economy. Even though it might appear so from an employee’s perspective, corporate leadership is not in an ivory tower.
Unlike some of you whose only exposure to it is playing COD with your bros, these cats are “in the sh*t” fighting for their livelihoods and those of their shareholders. CEOs have shifted their messaging drastically and done so in a hurry compared to late 2021.
Listen to your boy Zuck’s most recent guidance: “I expect us to get more done with fewer resources.” How about Sundar Pichai basically declaring that Google needs to get things done with “greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days.”
Companies with the means to do so are collecting and internalizing data on productivity of remote workers with the hopes of trimming the fat.
In the immediate term, many Fortune 100 companies have instituted hiring freezes or increased scrutiny in the process, and these same names have rolled out cash conservation programs more stringent than the EPA.
Whether it’s declaring that the consumer is softening or that Americans are trading down for less expensive versions of the same types of consumption items, I think the message is clear from earnings calls this quarter: the economy is slowing. We are moving towards austerity mode and in a hurry.
To steal a phrase from the CEO of Axon Enterprise Inc., Rick Smith, and, I guess, a retired entrepreneur named Ned Stark, “Winter is Coming.”
Trade down, a retail concept in which the consumer switches from a more expensive good to a cheaper one in the same category, is the least of our worries. The well that was pandemic stimulus is drying up.
CEOs aren’t optimistic. My take from listening to several dozen earnings calls is that economic growth is not assured in the short and medium terms.
For my readers, I challenge you to ask, what’s the disconnect between business leadership and government bureaucrats?
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