C.E.O.s Are Talking More About Recession

Despite a Incredibly flexible labor marketTalks of economic downturn are on the lips of corporate leaders.

James S. Tisch, chief executive of the hotel, insurance and industrial group, said on an earnings call with analysts last week that his “fearless forecast” was for a recession, but not one as devastating as ’08. Will be. Or ’09.

When asked by an analyst how a potential recession could affect Starbucks’ sales, the coffee chain’s interim chief executive, Howard Schultz, said, “We are very concerned and humbled by the environment.”

And William J. Hornbuckle, chief executive of MGM Resorts International, told analysts last week that he and his executives were “not blindsided” and that they were “well aware of the impact of inflation” and the possibility that the economy is being carried forward. For recession

The recession has been an increasingly hot topic. DealsBook reports newsletter. It is customary for large public companies to hold conference calls with analysts after reporting their earnings. Of the 409 companies listed in the S&P 500-stock index that took analyst calls to discuss the most recent quarter, the R-word came up as a topic 165 times, according to Sentieo, a market data provider.

A year ago, 42 earnings calls from S&P 500 firms for the third quarter expressed “recession.” Debates about a recession rose throughout the year, with big year-over-year jumps in the first and second quarters as well.

Last week, Federal Reserve officials announced a A fourth interest rate hike In an effort to control inflation Fear of economic crisis. Jerome H. Powell, the Fed chair, said he believed there was still a window for a so-called soft landing, in which inflation ends but the economy does not fall into recession.

“Is it tight? Yes,” Mr. Powell told reporters. “Is it still possible? Yes.”

Some economic indicators released last week appeared to support Mr. Powell’s view. last quarter, Gross domestic product rose At a better-than-expected annual pace of 2.6 percent. The government gave this information on Friday. Employers added 261,000 jobs. Their payrolls in October, which exceeded expectations.

Still, 88 chief executives on third-quarter conference calls said either the Fed’s interest rate hikes to fight inflation were a major factor slowing their business or they expected it, according to Sentio. Had. Last week, Steven Roth, real estate developer and chief executive of Varnado Realty Trust, told analysts that because the Fed was “deadly serious” about fighting inflation, “the economy is clearly slowing down.”

International recession is also a big topic. Of the 9,000 companies worldwide that Sentieo tracks, the topic of the recession came up in 2,122 of those companies’ conference calls over the past three months, compared to 193 in the same period last year.

Income growth has slowed significantly. Profits for S&P 500 companies that reported this quarter rose an average of just 2 percent, down from 6 percent growth a quarter earlier, according to FactSet, which tracks corporate profits and other market data. Worse, analysts now expect fourth-quarter profits for S&P 500 companies to be lower this year than a year ago. If that happens, it would be the first drop in profits for all 500 companies since the start of the pandemic.

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