Topline
Tesla CEO and billionaire Elon Musk said the U.S. economy will likely face a recession in the near term in an interview with Bloomberg on Tuesday, echoing concerns raised by several other top business leaders and financial institutions following the Federal Reserve’s recent, steeper-than-expected hike in key interest rates.
Musk said a recession was inevitable and likely to happen in the near term.
Key Facts
Speaking at the Qatar Economic Forum, Musk said a recession is “inevitable at some point,” when asked to respond to President Joe Biden’s contention that it was not inevitable.
The billionaire said although not a certainty, it is “more likely than not” that a downturn is coming in the near term, without offering a specific timeline.
Previously, in an internal email to Tesla executives, Musk said he had a “super bad feeling” about the economy as he called for layoffs in the company.
When asked about layoffs at Tesla, Musk said the company plans to slash 10% of its salaried workforce over the next three months but reiterated that the headcount of the hourly workforce will grow.
In total Musk said he expects about 3% of Tesla’s overall workforce will be laid off.
Big Number
76.1%. That’s the percentage of CEOs who believe they are either currently facing or will face a recession by the end of 2023 in their region of operation, according to a survey conducted by the Conference Board business research group. The survey in question was conducted in May, several weeks before the Federal Reserve’s steep hike in interest rates, which heightened concerns about a downturn.
Key Background
Besides Musk, several other top business leaders in the U.S. have flagged concerns about an upcoming recession in the U.S. Speaking two days before the Fed’s rate hike, Morgan Stanley CEO James Gorman placed the odds of a recession at “50-50” up from an earlier prediction of 30%. Gorman, however, said that a “deep or long recession” was unlikely. Earlier this month, JP Morgan CEO Jamie Dimon, without explicitly mentioning a recession, warned of an economic “hurricane” fueled by the Ukraine war and high inflation. Dimon said his bank is preparing for “bad outcomes.” Similarly, Wells Fargo CEO Charles Scharf in May said it will be “hard to avoid some kind of recession” but he did not expect it to be a deep recession. Last week, the Federal Reserve raised interest rates by 75 basis points to a target range of 1.5% to 1.75%—its steepest hike in 28 years. The measure was undertaken after data from the Labor Department showed that consumer prices in the U.S. were at a 40-year high with annual inflation surging to 8.6% in May.
Tangent
Musk, who has recently spoken about his political realignment from being a Democrat to a Republican, said in the interview he is planning to spend a “non-trivial” amount of around $25 million for funding a super PAC in the 2024 presidential elections. The billionaire, however, remained non-committal about supporting Donald Trump’s candidacy, stating he was “undecided at this point.”
Further Reading
Another Major International Bank Forecasts Recession In The U.S. (Forbes)
Most CEOs Expect A Recession In Next Year, Survey Says (Forbes)
Source: https://www.forbes.com/sites/siladityaray/2022/06/21/elon-musk-says-us-recession-is-inevitable-more-likely-in-the-near-term/