What does Elon Musk know about economics? Tesla CEO makes a grim prediction
Just a day before a Labor Department report on Friday detailed robust employment data from May, including the creation of 390,000 new jobs in the United States and a very low unemployment rate, the CEO Tesla CEO Elon Musk was in the midst of an economic crisis, announcing a hiring freeze and pledging to cut staff at his electric vehicle manufacturing business.
According to Reuters, Musk sent an email to his management team on Thursday titled ‘suspend all hiring globally’, saying he had a ‘super bad feeling’ about the economy and flagging plans to cut back on the economy. Tesla’s global workforce, which has around 100,000 employees, by ten%. Just two days ago, Musk announced the end of remote work options for Tesla employees in a memo, writing that “anyone who wants to do remote work must be in the office for a minimum (and I mean *minimum*) of 40 hours per week or start Tesla. That’s less than what we ask of factory workers.
Overall gains last month reflect a resilient U.S. labor market that has so far shrugged off fears of a weaker economy in the coming months, with the Federal Reserve steadily raising interest rates to fight the downturn. ‘inflation. The jobless rate remained at 3.6% in May, just above a half-century low, according to the Labor Department.
So what about Musk’s grim outlook?
Wages and expenses still on the rise: Companies in many sectors are desperate to hire because their customers have continued to spend freely despite growing concerns about high inflation. Americans’ finances have been boosted by rising wages and an unusually large pool of savings accumulated during the pandemic, especially by high-income households.
Workers, in general, enjoy almost unprecedented bargaining power. The number of people leaving their jobs, usually for better, better paid positions, has reached or is approaching a six-month high.
The average hourly wage rose 10 cents in May to $31.95, the government said, a solid gain but not enough to keep up with inflation. Compared with 12 months earlier, hourly wages rose 5.2%, down from a 5.5% year-over-year gain in April and the second consecutive decline. More moderate wage increases could ease inflationary pressures in the economy and help sustain growth.
Excellent report on the work, but: Musk isn’t alone in having a bullish view of what’s to come for the US economy, despite the positive jobs numbers.
Earlier this week, Jamie Dimon, Chairman and CEO of JPMorgan Chase, described the challenges facing the US economy as akin to a “hurricane” on the road and urged the Federal Reserve to take action. strong measures to avoid tipping the world’s largest economy into recession, according to Reuters.
Dimon’s comments come a day after President Joe Biden met with Federal Reserve Chairman Jerome Powell to discuss inflation, which is hovering at 40-year highs.
“It’s a hurricane,” Dimon told a banking conference, adding that the current situation is unprecedented. “At the moment it is rather sunny, things are going well. Everyone thinks the Fed can handle this. This hurricane is right over there on the road coming our way.
“We just don’t know if it’s Minor or Superstorm Sandy.”
At the same conference, Reuters reports that Wells Fargo CEO Charlie Scharf warned that the Federal Reserve would find it “extremely difficult” to manage a soft landing for the economy as the central bank seeks to put out the fire of inflation with interest rate hikes, according to Reuters. .
“The soft landing scenario is … extremely difficult to achieve in the environment we find ourselves in today,” Scharf said. “If there’s a short slump it’s not that deep…there will be pain as you go through it, overall everyone will be fine out of it.”
The wider impacts of job growth: The strength of the labor market itself contributes to inflationary pressures. With wages rising across the economy, companies are passing on at least some of their increased labor costs to their customers in the form of higher prices. The costs of food, gasoline, rent and other items — which fall disproportionately on low-income households — are accelerating at nearly the fastest rate in 40 years.
Inflation had started to soar last year as growing demand for cars, furniture, electronic equipment and other physical goods came up against overstretched supply chains and shortages of rooms. More recently, prices for services such as airline tickets, hotel rooms and restaurant meals have jumped as Americans shift more of their spending to these areas.
In an attempt to cool spending and slow inflation, the Fed last month hiked its short-term rate by half a point, its biggest hike since 2000, to a range of 0.75% to 1%. . Two more half-point rate hikes are expected this month and in July. And some Fed officials have suggested in recent speeches that if inflation shows no signs of slowing, they could implement another half-point hike in September.
Contributor: Associated Press