It’s difficult to believe that this problem isn’t affecting consumers everywhere right now. Retail earnings were already poor last quarter, and now one of the biggest retailers has lowered its projections even further. It won’t be long until we hear a similar narrative from Walmart, Costco, or other retailers in need of price cuts to move inventory that has been lying on the shelf for too long.
This isn’t likely to be limited to the retail sector. What happens to the labor market when a company’s operating margin expectations are sliced in half, forcing it to cancel orders and drop prices in order to clear inventory? It begins by cutting expenditures elsewhere, with employee compensation being one of the most significant. Don’t be surprised if you start hearing about layoffs as the downturn intensifies. The Fed will switch to a more dovish stance in an effort to avoid a recession if the labor market cools and consumer spending slows, but by that time it will probably be too late.
One of the worst parts about a recession is…
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Kurt S. Altrichter, CRPS®
Fiduciary Advisor | President
8400 Normandale Lake Blvd, Suite 920, Bloomington, MN 55437
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