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A severe recession is possible, economic expert warns

 2 years ago
source link: https://finance.yahoo.com/news/a-severe-recession-is-possible-economic-expert-warns-162559630.html
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A severe recession is possible, economic expert warns

Brian Sozzi
·Anchor, Editor-at-Large
Sat, June 11, 2022, 1:25 AM·3 min read
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Dust off your recession preparation handbook you used back in 2008-2009 as the setup exists for a severe recession not too far off in the future, warns one business cycle expert.

"The job market is pretty tight, so therefore this could mean a mild recession. I don't think that's knowable just yet. One of the things that we are seeing from our research — because we do look at 22 economies around the world — is that there is a setup for a more severe recession. A more international recession. The last time we had that would have been like the early 1980s," Economic Cycle Research Institute (ECRI) co-founder Lakshman Achuthan said on Yahoo Finance Live.

Signs of a brewing recession aren't too hard to spot right now.

For one, headline-grabbing layoffs are on the rise.

E-commerce site Stitch Fix (SFIX) said Thursday it will axe 15% of its corporate workforce as it deals with a slowdown in sales and increased losses. E-signature software company DocuSign (DOCU) said this week it would slow the pace of hiring. Electric scooter player Bird (BRDS) announced this week it would lay off 23% of its workforce as it clamps down on expenses.

Bird electric scooters are parked in the Ocean Beach neighbourhood of San Diego, California, U.S., ahead of the Fourth of July holiday July 3, 2020. REUTERS/Bing Guan
Bird electric scooters are parked in the Ocean Beach neighbourhood of San Diego, California, U.S., ahead of the Fourth of July holiday July 3, 2020. REUTERS/Bing Guan

Netflix (NFLX) and retail trading platform Robinhood (HOOD) have also cut jobs after lackluster first quarters. Meanwhile, cryptocurrency exchange platform Coinbase (COIN) has frozen new hiring and even rescinded some already-accepted job offers.

In turn, that is beginning to weigh more on consumer attitudes and spending.

The Michigan Consumer Sentiment reading tanked 14% in June compared to May, bringing the index to the trough hit in the middle of the 1980 recession. Consumers' assessments of their personal financial situation worsened about 20%, according to the new report. About 46% of consumers attributed their negative views on their financial situation to high levels of inflation.

Meanwhile, retailer Target (TGT) warned this week it would aggressively mark down inventory as consumers reign in their spending on non-essential goods.


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