Cracks Forming in the US Economy
By: Catherine Tan
Executives from the biggest tech, retail, finance, and consumer products companies are recognizing signs of a recession. The past few weeks, these publicly traded companies reported their quarter 2 earnings, providing a snapshot into consumer spending. These reports show the US economy is in a weird spot. People are still spending money, but most of it is going towards gas and necessities. And while unemployment rates are still low, companies are reducing hiring and starting to lay off employees.
Companies typically report earnings four times a year, releasing documents to the Securities and Exchange Commission (SEC) called 10-Q filings, as well as an annual report called the 10-K. From company earnings, analysts can determine spending trends in broad industries and specific companies.
Tech giants Google and Apple beat expectations but see slowing in consumer demand within the electronics industry. Amazon and Microsoft also reported high earnings, causing their stock prices to rise. Tech customers tend to be middle or high income, meaning these companies should be less likely to be hit very hard by a dip in the economy.
Mastercard also reported consistent spending among the wealthy but slowing rates for lower-income consumers. Companies such as Walmart are preparing for customers to prioritize grocery and necessity budgeting over extra luxuries. With inflation still on the rise and wage increases not matching the pace, people tend to put more of their money toward housing, food, and gas rather than clothing and electronics.
Overall, tech and finance companies plan to slow hiring through 2023 when they hope the market will restabilize. For Americans, these cracks in the economy signal a need to be more careful and aware of spendings. Prices go up, but people still need food, gas, and housing to live; there’s no time to complain, Americans must adjust.