Wall Street bankers, investors and economists have been puzzled for months about whether a US recession is imminent. But for some Americans, the relentless economic pain typical of recessions has already begun.
Al Brown and his fiancée faced a tough decision when they reviewed their weekly budget in May. “Which comes first, more food or more dish soap?”
Based in Concord, North Carolina, Brown was the primary breadwinner for his fiancée and two children. And in April, he was fired as global director of business development at software company Cascade.
Since then, he has given up his gym membership and makes a living selling miscellaneous items around his home, including computers and garden furniture. His 13-year-old son quit the basketball team. Losing a family source of income not only took an economic toll, but an emotional one as well.
“This is America, your value is your economic power. There’s no other way to look at it,” Brown said.
Brown, 37, now spends his days searching for jobs and contacting potential connections on the Internet. He said he has submitted more than 600 applications, but only a handful have been interviewed.
This is a far cry from the strength of the labor market that government statistics show. Employment has risen steadily in recent months despite the Fed’s punitive rate hikes, with the unemployment rate as low as 3.7% in May.
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A flyer for the career fair hosted by New Hanover NC Works and the Cape Fear Workforce Development Commission on Tuesday, June 20, 2023 in Wilmington, NC.
Investors and economists have predicted a recession since last year as the Fed raised interest rates to curb inflation. This has led companies to focus more on profitability than on growth, which means cutting spending and cutting staff.
Since then, tens of thousands of layoffs have occurred. Some of the furloughed workers have been able to get back on their feet. Some were not so lucky.
Nina McCallum, 54, was laid off from her writing job at the job site Glassdoor in March. Since then, she has not found her new position despite applying for hundreds of jobs.
She lives off her savings by selling her plasma and frequenting the food pantry while caring for her teenage son. Her domestic partner helps, but he cannot make up for her lost income.
“I don’t think it’s possible to get a high-paying job like the one I had, with big benefits,” said McCallum, who lives in Cleveland, Ohio.
Some experts predict that many more Americans could find themselves in this predicament.
“And the trend to focus on cutting costs will continue next year, resulting in a further increase in unemployment,” said Jefferies senior economist Thomas Simmons.
Simons said the impact of layoffs, currently concentrated on white-collar workers, would ripple through the economy through a “significant pullback in overall spending.” Consumer spending accounts for about two-thirds of economic output, so if layoffs force more Americans to cut spending, the economy could plunge into recession.
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A shopper carries a retail bag in Miami, Florida, Wednesday, June 14, 2023.
The National Economic Research Service usually does not make the call until several months after its launch. Academic bodies define a recession as a widespread slowdown in economic activity lasting more than a few months.
Still, the data points to financial market resilience and the domestic economy to be on track. The Nasdaq Composite Index posted its best first half of the year since 1983, and stocks have risen throughout the year, even as the Fed hinted it could continue to raise rates after its hawkish pause in June.
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Traders at work on the floor of the New York Stock Exchange on May 25, 2023.
And the economy had some buffers, such as savings Americans saved during the pandemic and delayed student loan payments. But later this year, student loan repayments will resume, and savings accounts are drying up.
Some experts are holding off recession bets even more as the economy turns out to be more resilient than expected. Bank of America CEO Brian Moynihan told CNN last week that he expects a gradual recession early next year, rather than the late 2022 recession many are predicting. He said he does.
She said that’s what’s frustrating McCallum the most. The data show the economy’s extraordinary resilience, but it feels like a recession is already happening in her world.
Regina Walton was looking for part-time work after being fired from her role as director of community management and customer advocacy in early May. She has type 1 diabetes and lives in her Bay Area of San Francisco, one of the most expensive housing markets in the country.
Walton said he was experiencing “a lot of uncertainty” but was trying to stay optimistic and resilient. She sees her latest layoff as a sign that she should eventually pivot her career to product management. It’s the job she wanted to return to from her previous job.
Still, the reality of having to pay rent and other heavy daily expenses is always on the back of her mind.
“It’s always hard to lose a job, but I had to rely 100 percent on myself,” Walton said. “I have nothing, I am not married, I am single, my parents are deceased. I am an only child. I am the main support system.”
Courtesy: Richard Murray/Nina McCollum/Regina Walton
Left to right: Richard Murray, Nina McCollum, Regina Walton. All three were laid off earlier this year and have faced difficulty finding new roles as more companies cut their roles as part of cost-cutting in an uncertain economic environment.
For many Americans, this isn’t the first time they’ve been laid off. After the outbreak of the 2020 coronavirus pandemic, businesses have shut down and companies have cut staff as Americans stay at home.
Richard Murray, 33, was laid off in 2021 after the company where he worked in digital sales eliminated his role.
He was laid off again from another job about four months ago, but was initially able to maintain health insurance through the Consolidated Omnibus Budget Adjustment Act (COBRA). COBRA generally requires employers with 20 or more employees to provide temporary health insurance extensions. to former employees.
But that plan expires on July 1, after which he will have to start paying for it entirely out of his own pocket. Murray said he may choose not to apply for insurance to avoid additional costs.
Murray, who lives in Boston with his border collie Maverick, has already made lifestyle adjustments to reduce his spending. He now shops for groceries at local chains instead of Whole Foods as he used to. He quit his personal training sessions at the gym.
However, in the two years since the pandemic hit, nearly 50 million people have lost their jobs. That means laid-off Americans were often able to find new jobs quickly because the job market was active. No such cushion exists today.
Brown said he was first fired from another company last August and then fired again before joining Cascade.
“I want companies to understand what that really means and what they’re actually doing to people when they’re just looking at it as they need to cut costs.” Mr Brown said.
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