Is a recession coming? Or are we in a recession? Are we going to lose our jobs? Choppy days lie ahead if reports are to be believed that there would be a fresh recession in the coming days. Fear has gripped workers from corporate and business world as there has been a buzz about a possible recession 2022. Analysts warned about the probability of struggling days as there have been reports that the economy across the world have slowed down. Meanwhile, governments across the world stayed mum about the possibility of an upcoming recession.Also Read – Wall Street Slips Into Bear Market As Recession Fears Loom
Signs of recession?
Basically, a recession is when economy starts shrinking as it stops growing. Among the signs that recession risks are rising: High inflation has proved far more entrenched and persistent than many economists. The clearest signal that a recession might be nearing, economists say as per news agency The Associated Press, would be a steady rise in job losses and a surge in unemployment. As a rule of thumb, an increase in the unemployment rate of three-tenths of a percentage point, on average over the previous three months, has meant that a recession will eventually follow.
Many economists also monitor changes in the interest payments, or yields, on different bonds for a recession signal known as an “inverted yield curve”. This occurs when the yield on the 10-year Treasury falls below the yield on a short-term Treasury, such as the 3-month T-bill. That is unusual, because longer-term bonds typically pay investors a richer yield in exchange for tying up their money for a longer period.
Recession fear: Big firms roll out steps to limit expenses
- Google CEO Sundar Pichai informed staff about a hiring slowdown this year. In an internal memo, Pichai told employees that the company will “need to be more entrepreneurial” and work with “greater urgency, sharper focus, and more hunger than we have shown on sunnier days”.
- Microsoft has laid off employees, in what they say, in efforts of a “realignment”. Layoffs at Microsoft reportedly affected nearly 1 per cent of its 1,80,000-strong workforce across its offices and product divisions. The company has also slowed its hiring in the MS Windows, MS Teams and MS Office departments.
- Meta (formerly Facebook) apparently warned employees of “serious times” while freezing hiring for certain roles. A report in Busines Standard claimed that CEO Mark Zuckerberg informed employees that he’ is anticipating one of the worst downturns in recent history.
- Popular video streaming platform Netflix has laid off at least 300 employees recently in the second round of layoffs. Senior creative professionals including Negin Salmasi and Sebastian Gibbs were asked to leave as the company indicated more future layoffs.
- Apple is reportedly planning to pause its hiring for 2023. The hiring changes at Apple Inc will not affect all the teams but some verticals will see less hiring activities next year, according to a report by Bloomberg. The company is likely to not fill replacement posts for now in a way to limit is expenses.
- Twitter has cut 30 per cent of its recruiting team while Elon Musk-run Tesla has been laying off hundreds of employees. Other tech companies that have slowed hiring include Nvidia, Snap, Uber, Spotify, Intel and Salesforce, among others. Cloud major Oracle recently considered laying off thousands of workers to save up to $1 billion in cost-cutting measures, the media reported.
- Last month, leading crypto exchange Coinbase announced that it is laying off 18 per cent of its workforce, or about 1,100 jobs amid the economic downturn. Brian Armstrong, CEO and co-founder said that while the company tried its best to get this just right, in this case, it is now clear that it is over-hired. “We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period,” Armstrong said in June, according to a report by IANS.
- Crypto trading and lending exchanges BlockFi and crypto.com have laid off hundreds of employees after the global crypto market was battered owing to a “dramatic shift” in macro-economic conditions. BlockFi CEO Zac Prince said that the company is reducing headcount by roughly 20 per cent and the reduction impacts every team at the company. “This decision was driven by market conditions that have had a negative impact on our growth rate and a rigorous review of our strategic priorities,” Prince said.
A look at market trends
Asian shares were mixed Thursday as optimism over earnings was tempered by persistent concerns about inflation and the Chinese economy, despite an overnight rally on Wall Street.
Shares rose in Tokyo, Sydney and Seoul, but declined in China. Eyes were on the Bank of Japan, which wrapped up a two-day policy meeting, without any major policy changes, as was widely expected.
The BOJ has not indicated it will follow the lead of other central banks, including the U.S. Federal Reserve, in raising interest rates to curb inflation. Japan has suffered years of stagnation, when deflation or falling prices was a major problem. Tokyo’s benchmark Nikkei 225 edged up 0.4% in afternoon trading to 27,803.00. Australia’s S&P/ASX 200 advanced 0.4% to 6,784.00. South Korea’s Kospi gained 1.1% to 2,411.86. Hong Kong’s Hang Seng slipped 0.7% to 20,745.35, while the Shanghai Composite fell 0.4% to 3,291.77.
Wall Street ended Wednesday with gains as investors welcomed another batch of encouraging profit reports from U.S. companies. The S&P 500 rose 0.6% to 3,959.90. The Dow Jones Industrial Average added 0.2% to 31,874.84, while the Nasdaq gained 1.6% to 11,897.65. Smaller company stocks also gained ground. The Russell 2000 climbed 1.6% to 1,827.95.
In energy trading, U.S. benchmark crude shed 62 cents to $99.24 a barrel in electronic trading on the New York Mercantile Exchange. It shed 86 cents to $99.88 per barrel on Wednesday. Brent crude, the international pricing standard, lost 51 cents to $106.41 a barrel.
(With inputs from Agencies)