It’s not just Cardi B. Chief executives of some of the country’s top companies are also getting really worried about the economy.
The warnings that a recession is coming – including from Tesla CEO Elon Musk and JPMorgan Chase CEO Jamie Dimon – reflect the deep uncertainty being felt in the country’s executive offices as inflation hits its highest annual rate in over 40 years.
The Federal Reserve kicks off its two-day meeting on Tuesday. Most analysts had expected the central bank to raise interest rates by half a percentage point for a second consecutive month, but a stronger-than-expected inflation report last week has markets believing an even bigger move could be coming.
And the central bank is almost certain to continue raising interest rates pretty aggressively in coming months as inflation continues to soar. The central bank hopes to slow down the U.S. economy just enough to curb inflation without sparking a major economic slowdown.
But that’s often easier said than done. As the cost of borrowing rises across the board for anything from mortgages to bank loans, companies could respond by cutting costs or staff, while people could start paring their spending.
Dimon, who heads one of the world’s largest banks, said he sees an economic “hurricane” on the horizon.
“That hurricane is right out there, down the road, coming our way. We just don’t know if it is a minor one, or Superstorm Sandy, or Andrew, or something like that. And you better brace yourself.”
Musk is also concerned.
He announced plans to cut the number of salaried workers at Tesla by 10% after reportedly saying in an internal email this month that he had a “super bad feeling” about the economy.
Even Cardi B is worried
Musk and Dimon are not the only CEOs to get worried.
Wells Fargo CEO Charles Scharf says there is “no question” the U.S. economy is headed for a downturn.
“I think it’s going to be hard to avoid, you know, some kind of recession, just given the magnitude of the slowing that has to take place,” he told a conference last month.
And it’s not just CEOs.
Rapper Cardi B made waves this month by seeming to express her own concerns with the economy in a tweet.
“When y’all think they going to announce that we going into a recession?” the artist tweeted.
Not all CEOs are worried, however
Not all chief executives are so pessimistic.
Though inflation remains a big concern, Americans are still spending money on vacations and meals out, and the labor market is strong.
The unemployment rate has dropped to 3.6%, according to the latest available government data, near where it was before the start of the pandemic.
A survey of business economists last month showed only about one in four economists anticipates a recession within next year, although that was before the latest inflation report showing stronger-than-expected price gains.
Airline executives say demand for travel has been strong they are having a difficult time keeping up, and they are optimistic about their futures, even with fuel costs surging as a result of higher energy prices.
“You know, we were in this long, dark tunnel, going through COVID,” United Airlines CEO Scott Kirby said in a TV interview last month. “We are out of the tunnel. You know, even with fuel prices up $10 billion year over year, we are going to be almost to 2019 profitability levels.”
“You know, we get a pretty live pulse of what’s happening on the streets every day, in the cities in which we live,” Khosrowshahi told a conference this month. “At this point, we don’t see any signal of a recession coming.”
But views could change if investors and consumers get spooked.
On Monday, the S&P 500 entered a bear market, when an index slumps more than 20% from its recent high, because of fears about inflation. United shares dropped 10%, while Uber shares lost 9%.
All this recession talk
All the recession talk is worrying some top executives. Chuck Robbins, the CEO of Cisco, said he is worried the talk about a recession itself could be self-fulfilling.
“You know, I have this idea that we talk so much about about a recession we may actually create one on our own,” Robbins told CNBC in late May. After all, fears about a recession could cause CEOs to preemptively hire less or even reduce staff, while people could respond by cutting spending. President Biden and his administration are trying hard to signal more confidence in the economy, as they seek to address the growing worries.
Treasury Secretary Janet Yellen herself had heard about Cardi B’s recent tweet. “I don’t have that much time for her, but I am alive,” Yellen said when asked at a conference if she knew who Cardi B was. Then, on a more serious note, Yellen played down the concerns about the economy, touting the strong consumer spending among some of the positive trends. “We have a very strong economy,” Yellen said. “I know people are very upset and rightly so about inflation, but there’s nothing to suggest that a recession is in the works.”