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Tag: recession

  • U.S. jobless claims leap to nearly two-year high of 261,000

    U.S. jobless claims leap to nearly two-year high of 261,000

    The numbers: The number of people who applied for U.S. unemployment benefits in early June jumped to a nearly two-year high of 261,000, but most of the increase took place in just two states: Ohio and California.

    New jobless claims in the seven days ended June 3 climbed by 28,000 from the prior week, the Labor Department said Thursday. The figures are seasonally adjusted.

    Layoffs rose early in the year and pushed jobless claims above 200,000, but until this week, Jobless claims has barely changed since the spring and indicated that layoffs remained low.

    Key details: Of the 53 U.S. states and territories that report jobless claims, 27 showed an increase last week. The other 26 posted a decline.

    Most of the increase was in California and Ohio. Minnesota also saw a sizable increase.

    Actual or unadjusted claims surged by 6,345 in Ohio to 16,717 — an unusually large gain.

    And they rose by 5,173 to 48,750 in California, the state with by far the largest number of jobless claims. That could reflect tech-related layoffs.

    Yet lots of states, including California, have suffered from a flood of fraudulent claims since the pandemic. Massive fraud in Massachusetts, for instanced, skewed the national jobless claims totals from March through May.

    Before seasonal adjustments, new U.S. jobless claims were a much smaller 219,391 last week. That was up from 208,856 in the prior week.

    The Memorial Day holiday may have also influenced new filings. Some people either delay or accelerate their claims applications around a holiday.

    The number of people collecting unemployment benefits in the U.S., meanwhile, fell by 37,000 to 1.76 million.

    A gradual increase in these so-called continuing claims over the past year suggests it’s taking longer for people who lose their jobs to find new ones.

    Big picture: Unemployment claims typically begin to rise when the economy is deteriorating and a recession is approaching. The latest increase could be a red flag, but it will take a series of higher readings to cement the case.

    Still, the increase in claims could give the Federal Reserve more reason to “skip” another increase in U.S. interest rates when senior officials meet next week.

    Wall Street widely expects the Fed to stay put to give it more time to evaluate the economy and gauge how quickly inflation is slowing after a series of rate hikes over the past year. The Fed hopes the labor market will cool off further and reduce the upward pressure on wages.

    Looking ahead: “The latest reading reflects a holiday-shortened week, which ought to raise suspicions that the big move was more noise than signal,” said chief economist Stephen Stanley of Santander Capital Markets. “I am eager to see next week’s reading before I draw any conclusions.”

    “Rising initial jobless claims is a classic leading indicator of a recession, but a one-week jump is too little data to call a trend,” said Bill Adams, chief economist at Comerica.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.44%
    and S&P 500
    SPX,
    +0.40%
    were narrowly mixed in Thursday trades.

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  • Eurozone Entered Technical Recession in 1Q

    Eurozone Entered Technical Recession in 1Q

    By Joshua Kirby

    The economy of the eurozone slipped into technical recession in the first quarter of the year, as forecasts were revised downward both for the end of last year and the first three months of 2023.

    The bloc’s gross domestic product fell 0.1% in the first three months of the year, data from statistics agency Eurostat showed Thursday, below the previous estimate of slight growth.

    The agency also lowered its final estimate for the last quarter of 2022 to a 0.1% fall from a previous flatline estimate, meaning the bloc entered a technical recession, which typically refers to two quarters of negative growth.

    The reading is below the flat growth expected according to an average of economists’ polled by The Wall Street Journal ahead of the release.

    Some economists nevertheless anticipated a potentially weaker showing. The revision to a decline was likely, analysts at UniCredit said ahead of the release, pointing to worse figures in Germany and Ireland and weakness in private consumption.

    Germany, the bloc’s largest economy, itself entered recession in the first quarter as household spending was squeezed by high inflation rates, according to figures published at the end of last month.

    Both government and household consumption were lower on the quarter in the eurozone, as were both imports and exports, Eurostat said.

    Compared with the same period the previous year, GDP rose 1%, Eurostat said. The agency had previously estimated a 1.3% rise on the year.

    Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

    

    


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    Remember that looming recession? Not happening, some economists say
    
			
    Remember that looming recession? Not happening, some economists say
    
			
    

    

    Economists and CEOs entered 2023 bracing for a recession. But a funny thing happened on the way to the downturn: The economy, propelled by surprisingly strong job growth and steady consumer spending despite high inflation, decided not to cooperate.
    

    Despite a concerted effort by the Federal Reserve to hamstring economic activity by driving up borrowing costs for consumers and businesses, a recession that once seemed around the corner now seems to be ambling into next year — if it arrives at all. 
    

    Halfway through 2023, “The market has told us: no recession, no correction, no more rate hikes,” Amanda Agati, chief investment officer for PNC Financial Services Asset Management Group, said in a report.
    


    Job creation across the U.S. has so far defied expectations of a slowdown, with employers adding an average of 310,000 people every month to payrolls, according to Labor Department reports. Hiring has also accelerated since March, with payrolls rising by nearly 300,000 in April and 339,000 last month, even as the unemployment rate ticked up as more people started to look for work. 
    

    

    

    

    And while high borrowing costs have pushed down housing prices in some cities, a severe shortage of homes is keeping prices elevated in many markets — far from the nationwide downturn some people predicted last year. 
    

    “Wrong R-word”
    

    “People have been using the wrong R-word to describe the economy,” Joe Brusuelas, chief economist at RSM, told CBS MoneyWatch recently. “It’s resilience — not recession.”
    

    Brusuelas still thinks a recession is highly likely — just not in 2023. “It’s not looking like this year — maybe early next year,” he said. “We need some sort of shock to have a recession. Energy could have been one, the debt ceiling showdown could have been one — and it still could.”
    

    

              
    
            
    

              Another booming jobs report provides evidence of resilient economy
    

              02:20
    

                          
    

    

    One factor that has fueled steady consumer spending, which accounts for roughly two-thirds of U.S. economic activity: Even after the highest iinflation in four decades, Americans still have nearly $500 billion in excess savings compared with before the pandemic. That money is largely concentrated among people making $150,000 a year or more — a cohort responsible for 62% of all consumer spending. 
    

    “That’s enough to keep household spending elevated through the end of the year,” Brusuelas said. 
    

    Coin toss
    

    Simon Hamilton, managing director and portfolio manager for the Wise Investor Group of Raymond James, puts the odds of a recession at 50-50, essentially a coin toss. “The reason those odds aren’t higher is because people are still working! It’s almost impossible to have recession with unemployment this low,” he said in a note to investors.
    

    Consumers, too, have become cautiously optimistic. A Deloitte survey in May found that the portion of people with concerns about the economy or their personal financial situation has fallen significantly since last year. The latest University of Michigan survey of consumer confidence also showed a slight uptick in sentiment last month.
    

    To be sure, pushing back the expected onset of a recession points to an economy that is losing steam. Business investment is weakening, and high borrowing costs have slowed manufacturing and construction activity.  
    

    “The economy is holding up reasonably well but faces several hurdles during the second half of the year, including the lagged effect of tighter monetary policy and stricter lending standards,” analysts at Oxford Economics wrote in a report this week.
    

    Oxford still predicts a recession later this year, although a mild one. While the firm’s business cycle indicator “suggests that the economy is not currently in a recession, [it] has lost a lot of momentum and is vulnerable to anything else that could go wrong,” the analysts wrote.
    

        
    


    


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    April U.S. factory orders rise for fourth gain in five months
    
			
    April U.S. factory orders rise for fourth gain in five months
    
			
    

    

    Orders for manufactured goods rose 0.4% in April, the Commerce Department said Monday. It is the fourth increase in factory-goods orders in the past five months.
    

    Economists surveyed by the Wall Street Journal were expecting a 0.6% rise.
    

    The gain was led by transportation equipment. Excluding that sector, orders were down 0.2%. 
    

    

    Durable-goods orders rose 1.1% in April, unrevised from the initial estimate last week. The advance durable-goods data is always released ahead of the full report. Nondurable-goods orders fell 0.1% in April. 
    

    Orders for nondefense capital goods, excluding aircraft, rose a revised 1.3% in April, down slightly from the prior estimate of a 1.4% increase. The gain was led by computers and machinery.
    

    

    


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    Employers are preparing for a recession, but that doesn’t always mean layoffs | CNN Business
    
			
    Employers are preparing for a recession, but that doesn’t always mean layoffs | CNN Business
    
			
    

    

    

    
    
    
      Minneapolis
    
      CNN
    
         — 
    
        

    

    
      Areas of the US economy have started to crack under the weight of persistently high inflation and a string of 10 consecutive rate hikes from the Federal Reserve.
  
    

    
      But despite all that, the labor market has kept humming right along. And that’s largely expected to be the case, again, in Friday’s monthly jobs report from the Bureau of Labor Statistics.
  
    

    
      Economists are forecasting a net gain of 190,000 jobs for May, according to Refinitiv. While that would mark a significant retreat from April’s surprisingly strong 253,000 jobs added, it would land slightly above the average monthly gains seen during the strong labor market in the years leading up to the pandemic.
  
    

    
      Economists are also expecting the unemployment rate to tick back up to 3.5%. The US jobless rate has hovered at decade-lows for more than a year, with the current 3.4% rate matching a 53-year low hit in January.
  
    

    
      Private sector employment increased by 278,000 jobs in May, according to ADP’s monthly National Employment Report, frequently seen as a proxy for the government’s official number. That’s significantly higher than estimates of 170,000 jobs added but slightly below the previous month’s revised total of 291,000.
  
    

    
      Additional labor market data released Thursday showed that initial weekly jobless claims for the week ended May 27 totaled 232,000, almost no change from the previous week’s revised total of 230,000 applications.
  
    

    
      “In the last few months, the job market has continued to defy gravity, adding a steady clip of jobs and holding unemployment at historically low levels despite a backdrop of rising interest rates, banking turmoil, tech layoffs and debt ceiling negotiations,” Daniel Zhao, lead economist at employment review and search site Glassdoor, wrote in a note this week. “After a healthy April jobs report, May is likely to repeat with an equally strong performance.”
  
    

    
      Consumer spending and the labor market — two ares of strength in the economy — have, in a way, continued to feed on themselves.
  
    

    
      Last week, a Commerce Department report showed that not only did the Fed’s preferred inflation gauge heat up in April but so did consumer spending. Economists largely attributed consumers’ resilience to the healthy labor market as well as ample dry powder stockpiled from home refinances and from the temporary pause in student loan payments.
  
    

    
      In turn, that’s kept businesses busy.
  
    

    
      “With demand for goods and services holding up, employers who have been cautious and have been very nervous about over-hiring are — when push comes to shove — having to keep hiring just to keep pace with business activity,” Julia Pollak, chief economist for online employment marketplace ZipRecruiter, told CNN. “They’re very worried about a recession later this year, but they need to keep hiring today to provide the pizzas that people are demanding and to prevent flights being canceled.”
  
    

    
      She added: “Companies have also learned the hard way how costly staffing shortages can be.”
  
    

    
      But labor shortages are becoming far less acute: This past Memorial Day weekend, 1% of flights were canceled, Pollak said, noting that cancellations were fivefold higher a year before.
  
    

    
      “And while that’s a good news story — the end of shortages and disruptions during the pandemic is good for most consumers and good for businesses — it does come at some cost, which is a measurable decline in worker and job seeker leverage,” she said.
  
    

    
      Labor turnover data released Wednesday showed that the US employment market remained tight in April.
  
    

    
      Job openings bounced up to 10.1 million positions, bucking economists’ predictions for a fourth-consecutive monthly decline, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey report. The jump brought the ratio of vacancies to unemployed to almost 1.8, which is well above a range of 1.0 to 1.2 that is considered consistent with a balanced labor market, according to Michael Feroli, JPMorgan chief US economist.
  
    

    
      Although the April JOLTS data showed that fewer people were voluntarily quitting their jobs, the amount of layoffs and discharges dropped during the month, suggesting that employers are continuing to hoard workers, noted economist Matthew Martin of Oxford Economics.
  
    

    
      While monthly job gains haven’t tailed off as much as anticipated to this point, there is a notable slowdown that’s occurred from the blockbuster job gains of the past three years.
  
    

    
      But whether the softening is a sign of a return to pre-pandemic form or perhaps of a downswing into a downturn, remains to be seen.
  
    

    
      Some of the traditional recession indicators have been flashing red. Layoff announcements have quadrupled so far this year to 417,500, which — excluding 2020 — is the highest January to May total since 2009, according to a report from Challenger, Gray & Christmas released Thursday. Falling consumer confidence, monthly declines in the Conference Board’s Leading Economic Index, and drops in temporary help employment are also signaling that a downturn is just ahead. However, that long-predicted recession isn’t here just yet.
  
    

    
      “We were in such an unusual place during the pandemic with some of those indicators at completely extraordinary heights that they have experienced extraordinary declines,” Pollak said. “But those declines were just a return to normal, not a contraction, and it’s not a recession.”
  
    

    
      The government’s May jobs report is scheduled for Friday at 8:30 a.m. ET.
  
    

    


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    10 Tips for Navigating a Down Economy | Entrepreneur
    
			
    10 Tips for Navigating a Down Economy | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    In a down economy, entrepreneurs face significant challenges, including decreased consumer spending, tighter credit markets and increased competition. However, this does not mean that entrepreneurs should give up on their businesses or goals. Rather, they must adapt to the changing market conditions and make the most of the opportunities that arise. A looming recession is but a roadblock, not the end of the road.
    

    Entrepreneurs must focus on their existing customers! They should prioritize customer satisfaction and work to strengthen relationships with their current customers. By providing excellent customer service and building strong relationships, entrepreneurs can improve customer loyalty, which can help them weather tough economic times. In addition, satisfied customers are more likely to recommend the entrepreneurs’ businesses to others, which can lead to new professional opportunities.
    

    Entrepreneurs and especially startups should, unfortunately, look for opportunities to cut costs and operate more efficiently. This could involve renegotiating contracts with suppliers, reducing overhead expenses or outsourcing non-essential tasks. By cutting costs and increasing efficiency, entrepreneurs can improve their profit margins and reduce the impact of a down economy on their bottom line.
    

    Related: How to Recession-Proof Your Business
    

    There are many other ways, however, to save money in a down economy. One of the most effective ways to save money is to cut unnecessary expenses, we have established that. But entrepreneurs should closely analyze their business expenses and identify areas where they can cut costs without affecting the quality of their products or services. For example, using more cost-effective marketing strategies.
    

    Additionally, entrepreneurs can save money by utilizing free or low-cost tools and resources, such as free marketing software, open-source technologies and affordable online courses. By being strategic about their expenses and finding ways to reduce costs, entrepreneurs can improve their profit margins and increase their financial stability, which can help them find the right path through a possible recession.
    

    They should also consider diversifying their products or services. In a down economy, consumer spending may be concentrated on certain types of products or services. By offering a broader range of products or services, entrepreneurs can tap into new markets and attract customers who may not have considered their business before.
    

    Another element for entrepreneurs to consider lies in whether they should consider partnerships or collaborations with other businesses. By working with other businesses, entrepreneurs can pool their resources and expertise to create new products or services, increase efficiency and expand their customer base. This can be especially valuable in a down economy when resources may be scarce.
    

    Business owners and entrepreneurs alike should be flexible and open to change. In a down economy, market conditions can change rapidly, and entrepreneurs must be prepared to adapt quickly. This may involve pivoting their business strategy, exploring new markets or changing their business model. By being open to change and willing to take risks, entrepreneurs can position themselves to take advantage of new opportunities as they arise.
    

    Related: How Great Entrepreneurs Find Ways to Win During Economic Downturns
    

    10 tips for navigating a recession
    

    Resiliency and determination are both key for entrepreneurs as they navigate challenges in a down economy, but they can take steps to adapt to the changing market conditions and succeed. By focusing on customer satisfaction, cutting costs, diversifying their products or services, collaborating with other businesses and being flexible, entrepreneurs can position themselves for long-term success, even in tough economic times. Despite decreased consumer spending, tight credit markets and increased competition, there are still numerous ways entrepreneurs can navigate a recession. Below are just 10:
    

      

    1. 

      Focus on cash flow: In a recession, cash flow is crucial. Entrepreneurs should prioritize generating positive cash flow and managing their expenses effectively.
      

      2. 

    2. 

      Cut costs: Entrepreneurs should take a close look at their expenses and identify areas where they can cut costs without affecting the quality of their products or services.
      

      3. 

    3. 

      Diversify revenue streams: Entrepreneurs should consider diversifying their revenue streams by offering new products or services, exploring new markets or partnering with other businesses.
      

      4. 

    4. 

      Increase marketing efforts: In a recession, competition for customers can be fierce. Entrepreneurs should increase their marketing efforts to ensure their business stands out from the competition.
      

      5. 

    5. 

      Focus on customer retention: It is more expensive to acquire new customers than to retain existing ones. Entrepreneurs should focus on providing exceptional customer service and strengthening relationships with their current customers.
      

      6. 

    6. 

      Embrace innovation: Entrepreneurs should be open to new ideas and embrace innovation. They should explore new technologies and business models that can help them stay ahead of the competition.
      

      7. 

    7. 

      Seek out opportunities: Entrepreneurs should actively seek out new opportunities, such as partnerships or collaborations with other businesses, that can help them navigate a recession.
      

      8. 

    8. 

      Negotiate with suppliers: Entrepreneurs should negotiate with their suppliers to reduce costs. By building strong relationships with their suppliers, entrepreneurs may be able to negotiate better prices or more favorable payment terms.
      

      9. 

    9. 

      Reduce debt: In a recession, debt can be a burden. Entrepreneurs should prioritize reducing their debt and improving their financial position.
      

      10. 

    10. 

      Stay positive and motivated: Finally, entrepreneurs should stay positive and motivated. It is essential that they remain focused on their goals and stay committed to their business, even during challenging times.
      

      11. 

    

    Related: 3 Ways to Maintain Growth Despite a Down Economy
    

    In spotlighting cash flow, cutting costs, diversifying revenue streams, increasing marketing efforts, focusing on customer retention, embracing innovation, seeking out opportunities, negotiating with suppliers, reducing debt, and staying positive and motivated, entrepreneurs can navigate a possible recession. By taking these steps, they can position themselves for long-term success, even during tough economic times.
    

    


     Michael Stagno
    

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    How to Attract Investors During Tough Times | Entrepreneur
    
			
    How to Attract Investors During Tough Times | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    Whether the economy is doing well or in a phase of uncertainty, the fundamentals of building an investable start-up remain the same. You don’t need to be a mind reader to determine what investors want to know.
    

    Here are five tips to help convince potential investors that your solution solves a big problem for a large market and that your team has the talent, creativity and character to deliver on your business plan in favorable or uncertain market conditions.
    

    1. Be clear about the problem
    

    It is more important than ever to be clear with investors about the problem your company solves. The number one thing that matters today is how quickly and clearly an entrepreneur can articulate the problem that her startup solves. Why? Because investors know that when a startup fails, it is usually because there is insufficient demand for the product. What specifically about your solution will make customers change what they are currently doing and pay for your new product?
    

    Related: 5 Things to Do Now to Propel Your Business in 2023
    

    2. Know your audience
    

    Determine beyond any doubt that you are working in a space that an investor cares about and that your vision and goals align with theirs. Investors in technology-driven high-growth companies are looking for hyper-growth in specific industries, for example, advanced materials, information technology or biotechnology — large markets with tremendous opportunities. If your vision isn’t stoked by the risk and endurance it takes to build and scale those businesses, high-growth entrepreneurship is likely not the right path for you.
    

    3. Provide the evidence
    

    Nothing beats demonstrating your first-hand understanding of your market. Entrepreneurs who have lived with a problem in previous roles or their personal lives uniquely understand the impact and the potential gains of their solution. Suppose that’s your backstory, great. If not, describing what you learned and how you pivoted from surveys, interviews and by listening to customers builds credibility—especially when some of those customers are willing to become early adopters and go through multiple iterations to prototype your technology and prove your business model. Convincing customers helps convince investors.
    

    Investors expect entrepreneurs to be enthusiastic. When that passion is combined with an understanding of customers’ needs and of the impacts that your startup solving their problems can have on their bottom line, investors pay attention. Focusing on your customer’s pain points and the payback of your solution encourages investors to focus on you.
    

    Related: A Good Story Isn’t Enough to Get Your Startup Funded. Here’s What Else
    You Need
    

    4. Understand the economics
    

    What has to happen for your new business to achieve 20, 50 or 100% year-over-year growth? Investors will listen when you demonstrate your clear understanding of the business unit economics for your company. Show how you can gain enough traction with the first feature set and early adopters to prove the market and technical viability of your solution and market. Sometimes entrepreneurs are so focused on a specific solution that they become less open to a solution that could be better. Show that you know how to listen for signals and to narrow up or pivot if that’s what it takes to scale.
    

    While there may be multiple longer-term markets and product enhancements, don’t dilute your team’s focus. Can you build the solution? Is there a gap in the solution? Can you plug in? Focus on business development, not product innovation. Prove scalability in the first market and generate enough revenue to secure follow-on funding to support additional growth.
    

    Related: 5 Things Investors Want to Know Before Signing a Check
    

    5. Show your flexible mindset
    

    Investors want to collaborate with high-integrity, coachable entrepreneurs. Every interaction with you influences whether you are someone investors will trust and want to invest in. Balance the tightrope between ego and confidence. Be willing to acknowledge what you know and what you don’t. It’s rare to find an entrepreneur who hasn’t made mistakes.
    

    Eventually, almost every startup will need a flexible mindset to pivot on some aspect of their business plan. Seek trusted advice, then follow your instincts. Successful entrepreneurship always comes back to the basics — market validation, product/market fit and staying focused on the business plan.
    

    Trustworthy, confident and coachable entrepreneurs don’t allow an uncertain economy to distract them from executing their business plan.
    

    


     Kristy Campbell
    

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    3 Strategies to Help Your Business Thrive During a Recession | Entrepreneur
    
			
    3 Strategies to Help Your Business Thrive During a Recession | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    If there’s a word that perfectly describes the state of the economy in 2023, that must be inflation. Ask any U.S. adult, and they’ll likely be aware of the inflation that has been hitting the American economy since the 2020 global pandemic. Recent studies show that Americans see inflation as the #1 issue facing the country, with 70% agreeing it’s a big problem and 68% revealing that inflation had an impact on their spending.
    

    In a context where people are choosing to cut essential items like gasoline, clothing and health products, it becomes essential for brands and business owners to ask themselves how to effectively market during a recession.
    

    My current business, Mawer Capital, was born in the midst of the recession. Since we sell online programs, the biggest challenge for us was to figure out how to market those products in a period where people were re-evaluating their spending choices.
    

    Three years later, I can safely say that we didn’t just survive the recession, but that our business thrived despite the state of the economy.
    

    In this article, I wanted to share some key lessons I learned while building a business during a recession with anyone who wants to build an unbreakable venture. Despite the terrible economic conditions, Mawer Capital had stellar growth last year, with annual revenue doubling and hiring tripling since 2021.
    

    I’ve chosen three key lessons I believe everyone should follow during a recession to grow their brands. These principles are also backed by historical evidence.
    

    Related: I Started 2 Companies During Recessions: Here Are 4 Tips For Scaling Your Startup During a Downturn
    

    1. Increase your marketing budget
    

    I know this might sound counterintuitive, but one thing you should NOT do during a recession is cut your marketing budget.
    

    There are countless examples that highlight how bad an idea this is. For instance, during the 1990-1991 recession, fast food giant McDonald’s decided to advertise less on television and print to cut costs and ride out the economic downturn. At the same time, Taco Bell and Pizza Hut — two of their major competitors — decided to take the opposite approach and increased their advertisements significantly.
    

    The result? Pizza Hut and Taco Bell increased sales by 61% and 40% respectively, while McDonald’s decreased sales by 28%.
    

    At Mawer Capital, we experienced something similar. While everyone else was cutting their ad budgets (Marketing Week estimated that ad spend went down by more than 30% during this period), we doubled our marketing budget.
    

    We started ramping up our ad budget to almost $100K a month, getting featured in the press multiple times and growing our social media presence. We did this because we realized that while all our competitors were going radio silent, we had a chance to replace them and become the industry standard.
    

    Don’t get me wrong. The decision to spend more money while everyone else was panicking was mentally challenging. But in hindsight, I can say that my company wouldn’t be where it is today if I had stopped communicating with potential customers.
    

    During times like these, the best thing you can do is to find smart ways to market your products or services rather than cut all your marketing efforts completely.
    

    2. Create a flawless customer experience
    

    During a recession, when it’s harder to attract new clients, the last thing you want is to lose your existing customers. This is why it’s so important to invest in building a flawless customer experience to ensure existing clients keep purchasing from you.
    

    For us, this meant doing two things. The first was to give our customers so much value on their first purchase, that many of them asked us to upgrade to higher-priced programs and are still with us to this day.
    

    The second is to communicate regularly with our clients to ensure they’re satisfied. If you aren’t sure how your customers feel about your business, try implementing a customer success survey to understand what you could optimize to retain more customers and keep your business afloat.
    

    Related: Starting a Business in a Recession: What You Should Know
    

    3. Build trust with your audience
    

    When prices increase and wallets shrink, brands must recognize that consumers will choose the brand they have a connection with.
    

    This is done by associating what you sell with an emotional state your customer can relate to. For us, that meant understanding the position our clients came from and identifying what their financial and life goals were.
    

    All of a sudden, we weren’t selling info products anymore. We were giving them an option, the chance to learn valuable skills they could use to grow their businesses or learn a new skill that could help them live life the way they wanted to. Obviously, this should be done ethically as consumers are becoming more and more sophisticated and can immediately sniff when a brand is trying to rip them off.
    

    This trust-building should be done through your communication and feedback, the care you put into making sure their concerns are heard and focusing on providing your customers with a product that goes well and beyond their expectations.
    

    In the end, countless successful businesses have been built during recessions. One could even argue that this is the perfect time to start your own venture or grow your existing one, as competitors are left without a compass. I hope you will find these three pieces of advice useful as you set out to build your business during these difficult times.
    

    Related: Don’t Let a Recession Ruin You. Here’s How Your Business Can Thrive During Hard Times
    

    


     Rudy Mawer
    

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    How to Manage a Startup Through Recessions and Downturns | Entrepreneur
    
			
    How to Manage a Startup Through Recessions and Downturns | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    A hesitant market and retraction in funding has directly impacted startups at every stage of growth. So how can founders steer their companies through a difficult period and come out stronger on the other end? I’ve led businesses through two economic downturns, in 2008 and 2020, and I’ve found that while no two downturns are the same, key learnings can help founders effectively manage through these headwinds.
    

    Here are some critical tips I’ve learned when times were at their most dire.
    

    Focus on what you can control 
    

    Negative headlines have risen steadily over the last two decades alongside the rise of cable news and social media. Despite study after study showing the poor effects on mental health as a result of negative headlines, the trend has continued. Why? It’s simple: negative news sells.
    

    Downturns are distracting and stressful, especially for business leaders who are trying to focus on decisions. According to a 2021 Harvard Business School survey of global CEOs, the most recent crisis left them feeling just as “scrambled and unsure as their employees.”
    

    To effectively manage through negativity, it’s important to focus on what you can control: reducing waste and expenses, increasing efficiency and building your product or service to serve customers better. Tuning out the noise will help you maintain focus and stay grounded.
    

    The reality is that downturns impact everyone, and if you’re affected, your competitors are too. Focusing on your business and what you can control will leave you in a far stronger position once the market stabilizes.
    

    Related: How to Recession-Proof Your Business
    

    Keep cash on hand
    

    If you wait until a downturn to think about generating cash, it’s already too late. That’s why companies must reach a profitable state on a timeline that makes sense for that business. Even in growth mode, founders can focus on a clear line of sight to profitability while simultaneously planning when to limit overgrowth.
    

    The main benefit of having cash on hand during a downturn is that it lets you continue investing with a focus on the long term while everyone else is waiting it out on the sidelines. It also means you won’t need to raise funds during a time when purse strings are tight, and you’ll inevitably get less favorable terms. According to our research, the most common reason startups fail is, unsurprisingly, running out of money (37%). By having cash on hand or cash coming in, you can avoid the worst possible scenarios.
    

    Another important way to conserve cash is to build a culture of reducing waste. Our portfolio companies perform a monthly bottom-up expense review to help cut waste continuously. When there is a downturn, this eliminates the need to review prior month’s (or year’s) worth of expenses. Leadership can instead focus on running the business and making continuous improvements.
    

    If you have money on hand, what can you do with it during a downturn? You can negotiate better terms on long-term contracts like real estate and advertising or focus on hiring for key positions with more available talent on the market. Cash can solve many of your problems, but maybe more importantly, cash can always be put to use for longer-term investments.
    

    Related: 4 Ways to Adopt and Maintain a Growth Mindset Even During a Recession
    

    Look to the future
    

    In 2010, Harvard Business Review analyzed 4,700 public companies that weathered the recessions of 1980, 1990, and 2000. The researchers found that 17% of the companies fared particularly poorly — they went bankrupt or were acquired — and 9% flourished coming out of these difficult times, outperforming competitors by at least 10% in sales and profit growth.
    

    What did the businesses that thrive have in common? The authors shared that the successful companies focused both on operational efficiency and continuing to invest “comprehensively in the future by spending on marketing, R&D and new assets.”
    

    Downturns can be a great time to focus on building so that your company is ready for the eventual upturn — which will happen. During economic slumps, many companies pull back and wait on the sidelines. That’s a reactionary, short-term mindset and creates opportunities for other businesses that have their eye on the long term. If you have enough cash to sustain the company during a quiet period, you can more aggressively invest in growth at a time when others aren’t. This can mean targeting new consumer segments, working on a new product or hiring a new team of developers.
    

    Related: 4 Ways Entrepreneurs Can Achieve Massive Growth in a Recession
    

    Conclusion
    

    Scarcity drives creativity and innovation; entrepreneurs can flourish with the right mindset and strategy. Remain focused on building your business, think long-term and sketch out opportunities for growth. If you have managed your capital and been prudent about your growth strategy, then you will be well-positioned to take advantage of a slowdown and enjoy a head start when others still have their business in first gear.
    

    


     Phil Santoro
    

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  • 
		
		
    
			
    I Asked ChatGPT How to Recession-Proof My Business | Entrepreneur
    
			
    I Asked ChatGPT How to Recession-Proof My Business | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    Entrepreneurs everywhere always have to look out for the dreaded “r-word.” They come around every so often and wreak havoc on businesses by reducing sales, dropping revenues and cutting employment. Of course, we’re talking about recessions — a natural, but certainly painful, part of the economic cycle.
    

    While there’s no way to completely insulate a company from the effects of recessions, there are steps you can take to help mitigate them.
    

    As a marketing and technology entrepreneur, I was curious to learn more about how to “recession-proof” my businesses. That’s why I asked ChatGPT, the world’s leading large language model (LLM) and the artificially intelligent darling of Silicon Valley.
    

    Below, I’ll share my conversation with ChatGPT about how entrepreneurs can protect their businesses from recessions and, ultimately, share my own thoughts on these ideas.
    

    Related: 9 Smart Ways to Recession-Proof Your Business (Fast)
    

    The prompt
    

    I opened our conversation by asking the following question in the form of a written prompt:
    

    How can I make my business recession-proof?
    

    Then, ChatGPT responded with the following steps after providing a brief disclaimer that no business can completely protect itself from inflation.
    

    ChatGPT’s “recession-proof” entrepreneurship formula
    

    Below are, verbatim, the seven recommendations offered by ChatGPT to help businesses weather the storm during recessions:
    

      

    1. 

      Build a strong cash reserve.
      

      2. 

    2. 

      Diversify your offerings.
      

      3. 

    3. 

      Focus on efficiency.
      

      4. 

    4. 

      Maintain good customer relationships.
      

      5. 

    5. 

      Keep an eye on your finances.
      

      6. 

    6. 

      Prepare for the worst.
      

      7. 

    7. 

      Stay flexible.
      

      8. 

    

    My thoughts on ChatGPT’s formula
    

    Personally, I think ChatGPT’s advice is excellent, and I generally agree with each point. However, I have slight qualifications for some. Below, I’ll share my thoughts on each:
    

    1. Build a strong cash reserve:
    

    To make it through down periods, you need to have cash saved for a rainy day. This is as true for businesses as it is for your personal finances. However, I’d go a step further and recommend holding non-cash savings as well to protect against inflationary effects. An asset such as gold and other precious metals, or even real estate, can serve as highly resilient stores of wealth during recessions — although they’re far less liquid than cash on hand.
    

    2. Diversify your offerings:
    

    This is a big one. Ensure you don’t count on a single product or service to carry your business. Diversify your revenue streams by offering several products or services so that if one gets hit badly by the recession, another can keep your business afloat.
    

    For example, a car dealership could diversify its offerings by adding commercial vehicles and trucks to its preexisting lineup of passenger vehicles.
    

    3. Focus on efficiency
    

    This one deserves a caveat. Prepare for a lean, hyper-efficient operation if economic circumstances require it, but don’t single-mindedly focus on efficiency by automating, downsizing and streamlining each and every task. Sometimes customer satisfaction and product refinement require a larger crew and more time dedicated to non-core functions, so allow space for that as well.
    

    4. Maintain good customer relationships
    

    This one is a given. Longstanding, loyal customers are far more likely to stick around during recessionary periods if you offer friendly, high-quality service. I suggest adding deal-sweeteners and discounts to repeat customers to keep them coming back.
    

    5. Keep an eye on your finances
    

    Create a budget, and stick to it. ChatGPT emphasizes the importance of monitoring your cash flow, and it’s right. If cash inflows aren’t leaving enough left over to cover all expenses while saving for a rainy day, you need to reevaluate your expenses and re-budget accordingly.
    

    6. Prepare for the worst
    

    Actively plan for an upcoming recession. In modern history, recessions have occurred every 3.25 years on average. Good entrepreneurs should use this as a baseline for when they should anticipate periodic business slowdowns, and contingency plans should account for these. This way, you can respond quickly if economic events lead to decreased sales.
    

    7. Stay flexible
    

    Always be willing to adapt. Market conditions can change suddenly, and savvy business owners need to be prepared for that by being flexible and able to pivot when necessary.
    

    Related: 5 Ways to Protect Your Business From a Recession
    

    Overall, ChatGPT presents a great set of principles to abide by if you want your business to be more resilient to recessions. But it’s worth reiterating that no business strategy is “recession-proof” as deep, economy-wide events can and will have unmitigable effects on businesses of all kinds.
    

    Yet, keeping a flexible and responsible approach to business management — as ChatGPT suggests above — would certainly make your company more likely to survive an economic downturn than one that doesn’t.
    

    


     Amine Rahal
    

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    Fed’s Bullard backs two more interest-rate hikes
    
			
    Fed’s Bullard backs two more interest-rate hikes
    
			
    

    

    St. Louis Fed President James Bullard on Monday said he would like to see two more quarter-percentage-point interest-rate hikes this year.
    

    “I think we’re going to have to grind higher with the policy rate in order to put downward pressure on inflation,” Bullard said in a moderated discussion at the American Gas Association’s Financial Forum in Fort Lauderdale, Fla.
    

    

    Bullard said that the timing of the rate hikes was uncertain but that he has been an advocate of raising rates “sooner rather than later.”
    

    “You want to get the downward pressure while you can,” he said.
    

    The Fed raised its benchmark rate by 25 basis points to a range of 5%-5.25% at its meeting in May. That matches the median forecast of Fed officials for the peak interest rate in this cycle.
    

    Officials at the Fed are divided over whether to continue to hike rates at their meeting in mid-June or pausing to see how the economy is affected by lags from the rapid pace of hikes. Some officials don’t like the word “pause” and have described holding rates steady in June as a “skip,” because it underlines that they are not saying they are done raising rates. 
    

    The markets think the Fed is done with rate hikes and have even been pricing in rate cuts later this year.
    

    Bullard said that the Fed’s forecast of no more hikes was based on its expectations of slower growth and a faster drop in inflation in the first half of the year than has been seen in subsequent data.
    

    “Inflation is hanging up too high,” Bullard said.
    

    Stocks
    
        DJIA,
    
        -0.24%
    

            SPX,
    
        +0.22%
    
       were set to open slightly higher on Monday, while the yield on the 10-year Treasury note
    
        TMUBMUSD10Y,
    
        3.716%
    
       rose to 3.7%. 
    

    

    


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    The U.S. economy might still be too strong for its own good
    
			
    The U.S. economy might still be too strong for its own good
    
			
    

    The economy is slowing all right, but oddly, it might still be too strong to get inflation to fall much faster and help the U.S. avoid recession.
    

    Gross domestic product, the official scorecard of the economy, decelerated to a 1.1% annual rate of growth in the first three months of this year. That’s down from 2.6% and 3.2% in the prior two quarters.
    

    

    The slowdown in growth is exactly what the Federal Reserve is aiming for. 
    

    The central bank is trying to pull a rabbit out of a hat by cooling off the economy enough to extinguish the highest inflation since the 1980s and avoid a recession at the same time.
    

    To achieve its goal, the Fed  has jacked up a key U.S. interest rate above 5% from near zero over the past 15 months. Higher borrowing costs slow the economy by reducing consumer spending and business investment.
    

    The strategy appears to be working. The yearly rate of inflation tapered off to 4.9% in April from a 40-year peak of 9.1% last summer.
    

    Yet it’s far from clear the economy will slow enough to put inflation on a track to reach the Fed’s 2% target without further interest-rate increases. The Fed raised rates again earlier this month, but signaled it hopes to stand pat for the rest of the year.
    

    The early evidence in the second quarter is mixed. 
    

    Consumer attitudes about the economy soured in May amid talk of recession and looming U.S. debt-ceiling crisis, for one thing.
    

    Americans have also cut spending on many big-ticket items such as furniture and appliances and they are leery of taking on major new debt. Since last summer the savings rate has almost doubled to 5.1% from a 17-year low .
    

    The latest earnings report from Home Depot underscores the problem.
    

    Home Depot posted lower first-quarter profits and said sales this year could fall for the first time since 2009, when the U.S. was exiting a severe recession.
    

    The popular retailer sells many expensive goods such electric tools and appliances and provides the materials needed for many major home projects. These are the sorts of purchases Americans are putting on hold.
    

    Yet other measures show the economy is still expanding at a modest pace — and that it may have even perked up.
    

    Take retail sales. They rose in April for the first time in three months, led by an increase in auto sales.
    

    “Retail sales came in strong again, showing how the consumer isn’t showing any signs of slowing down,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance  
    

    Steady demand for new cars and trucks, in turn, has spurred automakers to ramp up, especially with shortages of key parts continuing to ease. U.S. industrial production rose 0.5% in April after stalling out for two months, mostly because of the auto industry.
    

    Auto sales are on track to increase sharply this year after falling to an 11-year low in 2022. Why is that a big deal? Recessions are basically unheard of absent an outright decline in car buying.
    

    It’s not just cars, either.
    

    Consumers aren’t spending as much on goods, but services are another matter. They have spent the bulk of their discretionary income on travel, recreation and dining out, the sort of things that are the first to go when times get tough.
    

    Hotel bookings, plane-ticket purchases and dinner reservations are all near pre-pandemic peaks — definitely not a sign of an approaching recession.
    

    The early read on second-quarter GDP, not surprisingly, is fairly positive.  The Atlanta Federal Reserve’s GDPNow estimates growth at 2.9%. JPMorgan is more modest at 1%.  And Nomura is at 0.7%. 
    

    What’s keeping the economy going despite sharply higher borrowing costs is the strongest labor market in decades. Businesses are still hiring and the economy is still adding jobs, keeping the unemployment rate at an extremely low 3.4%.
    

    Even a recent increase in layoffs, as represented by rising jobless claims, overstates emerging weakness in the labor market. Major fraud in Massachusetts appears to have exaggerated how many job  losses are taking place in the economy. 
    

    A tight labor market would normally be a great thing. Now it’s a double-edged sword.
    

    Workers are reaping bigger pay increases to help them cope with higher prices, but rapidly rising wages are also adding to high inflation. Businesses have tried to offset higher labor costs partly by charging more for their goods and services.
    

    The uber-strong labor market leaves the Fed in a bind. 
    

    If job openings and hiring don’t weaken a lot further, the economy is likely to grow fast enough to maintain the upward pressure on inflation. The Fed could be forced to come off the sidelines and raise interest rates again, raising the odds of a recession.
    

    Several senior Fed officials indicated this week they have not seen enough evidence to support a freeze in interest rates for the rest of the year.
    

    “Should inflation remain high and the labor market remain tight, additional monetary policy tightening will likely be appropriate,” said Fed Gov.  Michelle Bowman.
    

    Even if the Fed doesn’t raise rates again, though, many Wall Street
    
        DJIA,
    
        -0.33%
    
       economists think a recession is inevitable by the end of the year. They view the seeming green shoots in April as a feint, pointing to softer consumer spending, waning business investment and the slumping housing and manufacturing industries.
    

    “The march to recession continues, with some rest stops along the way,” said chief economist Steve Blitz of TS Lombard.
    

    


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  • 
		
		
    
			
    What happens if the U.S. defaults? How the debt ceiling could impact your money.
    
			
    What happens if the U.S. defaults? How the debt ceiling could impact your money.
    
			
    

    

    Time is running out to reach a deal to avert a historic default on the nation’s debt, with Treasury Secretary Janet Yellen warning that the U.S. could run out of money to pay the bills by June 1. On Friday, negotiations broke down between the White House and Republican lawmakers as the sides seemingly hit an impasse.
    

    Breaching the debt ceiling may sound esoteric, but financial experts warn it could hurt Americans financially in a number of ways. Here’s what to know. 
    

    What is the debt ceiling?
    

    The debt ceiling, which is set by Congress, represents the maximum amount the federal government can borrow to pay its debts. Raising the debt ceiling doesn’t authorize new spending, but allows the government to fund its previously approved obligations, ranging from Social Security payments to military salaries. 
    


    Failing to raise the debt ceiling is “like going to a restaurant, looking at the menu, seeing how much everything costs and by the time you get the check, saying, ‘Never mind, I can’t pay this much,’” said Jacob Channel, senior economist at LendingTree. 
    

    Has the U.S. ever breached the debt ceiling?
    

    No, although it’s come close several times before, most notably in 2011, when lawmakers agreed to raise the debt limit just days before the nation was about to exhaust its borrowing capacity. That led credit ratings agency Standard & Poor’s to downgrade U.S. debt for the first time. The stock market tumbled, with the Dow shedding 17% in the weeks surrounding the crisis.
    

    “It’s hard to overstate how bad it would be,” Channel said.
    

    How would a debt-ceiling breach impact my 401(k)?
    

    A default would rock global financial markets, spurring many investors to sell their stocks and bonds. Prices would plummet, although it’s unknown how severe the hit would be given that the U.S. has never been in such a situation.
    

    “There is a great chance that there is meaningful disruption to the U.S. financial markets” if a breach occurs, noted Tony Roth, chief investment officer at Wilmington Trust. “You’d find the entire country would be up in arms, frankly, by the disruption that it would cause in the financial markets.”
    

    Would I still get my Social Security payment?
    

    Social Security recipients might not get their checks on time, according to experts. With 66 million recipients, such a delay is likely to create financial hardship for many, especially seniors and other Americans who rely on Social Security as their main source of income.
    

    If the U.S. defaults, “It is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security,” Yellen said in April.
    

    Would federal employees get paid?
    

    As Yellen noted, federal workers and members of the armed services might not get paid. The U.S. would need to decide what payments to prioritize with what money it still has available, and it could opt to continue paying interest on its bonds in order to avoid a debt downgrade rather than pay federal salaries.
    

    “It could be they decide, ‘Hey, we aren’t going to pay any government employees this week,’” noted Patrick Gourley, associate professor of economics at the University of New Haven, in an interview with Government Executive, a publication that covers the federal government.
    

    What happens to Medicare and Medicaid?
    

    Both could be disrupted, potentially impacting care for older Americans on Medicare and low-income households that rely on Medicaid. A combined 158 million people are enrolled in Medicare and Medicaid — almost half the U.S. population.
    

    “Get your health care now. Don’t wait until June 1,” Sara Rosenbaum, a health law and policy professor at George Washington University, told Axios. “My message to the world is, don’t wait on that orthopedic surgery.”
    

    Would it impact my credit cards?
    

    A breach would likely raise the broader cost of borrowing by pushing up interest rates, including on credit cards.
    

    That would hurt. Credit card annual percentage rates are already at record highs, reaching almost 21%, the highest level since the Federal Reserve began tracking APRs in 1994. And consumers already owe almost $1 trillion on their charge cards, up 17% jump from last year and a record high.
    

    How would a debt-ceiling breach impact mortgage rates?
    

    It could get even more expensive to buy a home because a default would force the Treasury Department to pay higher interest on its bonds to convince investors to stick around — and mortgage rates and other borrowing costs tend to follow Treasury rates.
    

    Mortgage rates could surge to 8.4% by September, up from 6.9% now, if the debt ceiling is exceeded, according to Zillow. That would make a mortgage payment on a typical home 22% more expensive and likely “freeze” the market, the real estate company said.
    

    Would the U.S. fall into a recession?
    

    Even a short debt-ceiling breach of a week or less would likely tip the economy into a recession, Mark Zandi, chief economist of Moody’s Analytics, said in a recent report. A short breach would be “enough to undermine the already fragile U.S. economy,” Zandi wrote. 
    

    But if the breach lasted longer than that, the U.S. could fall into a “deep recession,” with employers cutting 7.8 million jobs and the jobless rate jumping to 8%, or about double its current level, Zandi predicted.
    

    How long could a debt-ceiling breach last?
    

    Given the disruption — which would impact anyone with a 401(k) or who relies on government programs — it’s likely that the uproar would force the White House and Congress back to the negotiating table to quickly find a solution, experts say. 
    

    “If we have a default, the dislocation would be so great that the default wouldn’t last long because the pressure would be so intense to fix the situation,” Roth of Wilmington Trust said. “It would only last a couple of days.”
    

        
    


    


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  • 
		
		
    
			
    Why a Recession Can Be a Good Time for Expansion | Entrepreneur
    
			
    Why a Recession Can Be a Good Time for Expansion | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    “We very much believe strongly in investing through downturns” is a famous remark by Tim Cook, CEO of Apple Inc. With this philosophy, Apple has time and again managed to not only survive but thrive during periods of economic upheaval. At a time when major tech companies were shutting down shops during the recession of the dot-com collapse, Apple focused on acquiring graphics and productivity software companies.
    

    Opportunity and hidden value are often-overlooked aspects of recessions, but it takes the right entrepreneurial mindset to see the potential upside of recessions in the first place.
    

    The mainstream and more conservative approach calls for minimizing costs and risks and “waiting it out” until the economy improves. Indeed, the current economic climate, with a boogeyman recession that has been looming “just around the corner” for a year or more, has induced similar feelings of uncertainty, caution and a desire to tighten things down and wait until sunnier skies prevail.
    

    But does this strategy make it harder for you to spot new opportunities that may arise? Could a shift in mindset to viewing recessionary periods as rife with opportunity help take your business to the next level?
    

    As someone who has helped scale hundreds of companies, I sit firmly in the camp that views recessions as opportunities for growth. It doesn’t mean I act or advise clients to act recklessly. Far from it. In fact, investing in new markets, technologies or sectors during challenging economic times requires even greater awareness of market conditions on the ground and an ability to perform due diligence optimally.
    

    International expansion, my area of expertise, is one area in particular where businesses can find greater value or opportunity during periods of economic uncertainty or downturn. But how do you spot those opportunities, particularly in a market where you have no presence and limited knowledge?
    

    Related: Is a Recession Actually a Good Time to Expand Your Business?
    

    Spotting value in overseas markets
    

    Through accurate assessment of internal and external factors, you can maximize your chances of spotting value overseas in the wake of reduced competition. For instance, you can reprioritize your expansion plans by focusing on markets that are hit harder than most during a recession. This will increase your chances of success as your competitors are likely to be on the defensive in such markets. Businesses operating in industries relatively immune to a recession, such as consumer staples, shipping, utilities and healthcare, tend to fare better than others when executing expansion plans in recession-hit economies. What opportunities may offshore markets yield for your company in these areas?
    

    Once you’ve evaluated your product/market fit in new markets and identified any gaps you may be able to close, you stand to benefit immensely by identifying and investing in undervalued assets and opportunities. These investments can develop into a sustainable competitive advantage to last for the long run.
    

    Identify top talent
    

    Recessions are almost always accompanied by companies laying off employees in droves to stay afloat. This often results in even the best employees departing despite stellar job performance and drive to grow. This creates a unique scenario where the supply of top talent increases while demand decreases.
    

    If the world were to experience another Great Recession, the job market would be flooded with people looking for opportunities even at lower compensation in return for job security and a growth ladder. Your business can take advantage of this skewed job market by seeking out top talent and investing in it.
    

    This human resource investment can prepare your company for success in the future. You can hire skilled, ambitious and growth-oriented employees at less-than-market rates to become partners in your future vision.
    

    Related: Most Businesses Slow Down During a Recession — Here’s How to Keep Pace and Grow Your Company in 2023
    

    Explore incentive programs overseas
    

    It is not uncommon for a country to offer incentives to foreign players to pursue investment and expansion plans during a stagnant economy. This can be a win-win for the affected economy and the foreign businesses setting up shop in a new market.
    

    For instance, China’s recent stimulus package in the wake of its zero-Covid policy, tax cuts and liquidity injections are meant to spur demand and kickstart business activity.
    

    Such government incentives are great for providing a cushion for your global expansion plans and gaining a first-mover advantage. While your competitors are busy firefighting a recession, you can strategize and pivot to expanding rather than cutting back.
    

    To avoid missing out, you need to stay up-to-date with the policy changes and new incentives, which can be quick and time-sensitive. One way to spot opportunity in an unfamiliar market and act quickly is to leverage the local expertise of a Professional Employer Organization (PEO).
    

    Expand through a recession with a local expert
    

    A recession can be a challenging period for growth, especially when expanding into a new country, and it is not for everyone. There are often unprecedented market forces to tackle in addition to intense competition and thin margins. But if you manage to focus on your strengths while minimizing your risks, you can use the recession to your advantage.
    

    A recession offers unique value that simply requires experience and the right timing to yield significant rewards. Partnering with a trusted PEO partner like INS Global is one such strategy that helps you leverage decades of global expansion expertise while being fast and effective.
    

    Related: How Great Entrepreneurs Find Ways to Win During Economic Downturns
    

    


     Wei Hsu
    

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  • 
		
		
    
			
    How Ecommerce Businesses Can Succeed During a Downturn | Entrepreneur
    
			
    How Ecommerce Businesses Can Succeed During a Downturn | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    Business owners around the world turned the page into 2023 facing a complicated set of challenges. A combination of macroeconomic forces are working together to make life difficult for small businesses and large corporations alike. These economic trends will have a diverse set of effects on employers, employees, job seekers and customers, leading some businesses to freeze in a state of paralysis.
    

    In countries throughout the world, the ongoing challenge of inflation is making it more expensive for businesses to pay for the goods and services they need to survive. Whether it’s a local restaurant buying ingredients and printing menus or a global corporation paying for software subscriptions, rising costs are having a domino effect that eventually reaches the end consumer. When inflation isn’t controlled, it becomes a perpetual pain machine: Consumers with diminished purchasing power are left to choose between the goods and services they need, leaving businesses to deal with increased competition for wallet share.
    

    In particular, ecommerce businesses are navigating the headaches of inflation while also dealing with the long-term impacts of global conflict and the ripple effect of the Covid-19 pandemic. Inventory challenges caused by supply chain disruptions make it more difficult for businesses to ship orders and meet customer expectations. Some organizations don’t have the agility to keep up with increases in demand, while others are left with warehouses full of unsold inventory.
    

    The era of easy money is over, and business leaders know they will have less margin for error in 2023 and beyond. Yet the basic instincts for how to survive a recession — cut spending, lay off employees and wait for the recovery — could prove fatal in the current downturn. Past recessions have shown that investing in innovation pays enormous dividends during tough economic times. While it may seem counterintuitive, now is the moment to bet big on digital transformation and race ahead of more careful competitors.
    

    Related: How Ecommerce Companies Can Grow During a Recession
    

    A pivotal moment for platform investments
    

    When there’s less money to go around, it doesn’t pay to be careful — it pays to be nimble. Consumer-facing businesses need to be able to respond quickly to changes in demand or customer sentiment. If a product suddenly takes off, a retailer needs to be able to stock it. If a service provider starts to see declining subscriber numbers, it needs to adjust offerings quickly to stop the bleeding. Those that take a “wait and see” approach to their problems will eventually find that they’ve been overtaken by fast movers and it’ll be too late to save themselves.
    

    How can businesses use digital transformation to achieve more agility in 2023? The key is to take advantage of platform technologies. Platform approaches like enterprise marketplaces and dropship models make it possible for large and small organizations to minimize their risks and maximize the upside for a potential recovery. By investing in marketplace technology, B2B and B2C businesses can rely on a network of third-party sellers when they need to respond to a sudden surge in demand.
    

    This seller network also provides a new layer of financial security — if demand suddenly declines, the burden of unsold inventory is spread out throughout the network instead of concentrated in a single warehouse. Marketplace and dropship models also make it possible for businesses to diversify their supply chain and quickly overcome some of the short-term snarls that have characterized the last two years.
    

    Most importantly, platform investments ensure that an organization will be in pole position when the economy begins to recover. Overly careful organizations will cut costs and reduce inventory during the downturn, putting them behind the curve when they inevitably need to scale back up. Agile businesses can rely on their platform technologies to scale without roadblocks during an upswing, relying on partner inventories to ensure that a hot product never truly goes out of stock. While economic downturns often separate successful businesses from their doomed competitors, it’s the recovery that truly reveals which organizations will become market leaders.
    

    Related: Why Retailers Should Transition to a Marketplace Model
    

    The only way is forward
    

    In the aftermath of the Great Recession, retailers struggled for years to overcome economic headwinds and regain business momentum. The onset of the Covid-19 pandemic, however, only led to a brief period of uncertainty before businesses adjusted to the new field of play. No one can predict the extent of the current downturn and how long it will take for inflation to come back to Earth — nor can they predict what will come next.
    

    Businesses in every industry, but ecommerce businesses in particular, can’t afford to wait indefinitely for the economic tides to turn. We’ve seen upswings and downturns grow more frequent and more volatile in the last decade, and the only way to stay afloat during the changes is to move forward and focus on agility. By committing to digital transformation — investing in platform technologies while others stand still — ecommerce businesses can take advantage of the current slowdown and race ahead of the competition for a long-term recovery.
    

    Related: 9 Smart Ways to Recession-Proof Your Business (Fast)
    

    


     Adrien Nussenbaum
    

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    Philadelphia Fed’s factory gauge shows ninth straight month of declining activity in May
    
			
    Philadelphia Fed’s factory gauge shows ninth straight month of declining activity in May
    
			
    

    

    The numbers: The Philadelphia Federal Reserve said Thursday its gauge of regional business activity rose to negative 10.4 in May from negative 31.3 in the prior month. Any reading below zero indicates deteriorating conditions. This is the ninth straight negative reading and the eleventh in the last twelve months. 
    

    Economists polled by the Wall Street Journal expected a negative 20 reading in May.
    

    

    Key details: The barometer on new orders increased 13.8 points but remained at negative 8.9 in May. The shipments index rose slightly to negative 4.7.  The measure on six-month business outlook worsened to negative 10.3 in May from negative 1.5 in the prior month.
    

    Big picture: The continued contraction in activity is a sign that U.S. manufacturing continues to struggle.
    

    The Philadelphia Fed index is closely followed to give economists an advance signal of factory conditions across the country. 
    

    The national ISM manufacturing index has been in contractionary territory for six months.
    

    Earlier this week, the similar Empire State survey released by the New York Fed showed manufacturing activity plummeted 42.6 points to negative 31.8 in May. 
    

    Market reaction: Stocks
    
        DJIA,
    
        -0.23%
    

            SPX,
    
        +0.05%
    
       were set to open mixed on Thursday. The yield on the 10-year Treasury note
    
        TMUBMUSD10Y,
    
        3.627%
    
       rose to 3.62%. 
    

    

    


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    Time is running out to raise the U.S. debt ceiling — here’s how it could impact your money
    
			
    Time is running out to raise the U.S. debt ceiling — here’s how it could impact your money
    
			
    

    

    Time is running out to reach a deal to avert a historic default on the nation’s debt, with Treasury Secretary Janet Yellen warning that the U.S. could run out of money to pay the bills by June 1. Breaching the debt ceiling may sound esoteric, but financial experts warn it cause hurt Americans financially in a number of ways. Here’s what to know. 
    

    What is the debt ceiling?
    

    The debt ceiling, which is set by Congress, represents the maximum amount the federal government can borrow to pay its debts. Raising the debt ceiling doesn’t authorize new spending, but instead allows the government to fund its previously approved obligations, ranging from Social Security payments to military salaries. 
    

    Failing to raise the debt ceiling is “like going to a restaurant, looking at the menu, seeing how much everything costs and by the time you get the check, saying, ‘Never mind, I can’t pay this much’,” said Jacob Channel, senior economist at LendingTree. 
    


    Has the U.S. ever breached the debt ceiling?
    

    No, although it’s come close several times before, most notably in 2011, when lawmakers agreed to raise the debt limit just days before the nation was about to exhaust its borrowing capacity. That led credit ratings agency Standard & Poor’s to downgrade U.S. debt for the first time. The stock market tumbled, with the Dow shedding 17% in the weeks surrounding the crisis.
    

    “It’s hard to overstate how bad it would be,” Channel said.
    

    How would a debt ceiling breach impact my 401(k)?
    

    A default would rock global financial markets, spurring many investors to sell their stocks and bonds. Prices would plummet, although it’s unknown how severe the hit would be given that the U.S. has never been in such a situation.
    

    “There is a great chance that there is meaningful disruption to the U.S. financial markets” if a breach occurs, noted Tony Roth, chief investment officer at Wilmington Trust. “You’d find the entire country would be up in arms, frankly, by the disruption that it would cause in the financial markets.”
    

    Would I get my Social Security payment?
    

    Social Security recipients might not get their checks on time, according to experts. With 66 million recipients, such a delay is likely to create financial hardship for many, especially seniors and other Americans who rely on Social Security as their main source of income.
    

    If the U.S. defaults, “It is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security,” Yellen said in April.
    

    Would federal employees get paid?
    

    As Yellen noted, federal workers and members of the armed services might not get paid. The U.S. would need to decide what payments to prioritize with what money it still has available, and it could opt to continue paying interest on its bonds in order to avoid a debt downgrade rather than pay federal salaries.
    

    “It could be they decide, ‘Hey, we aren’t going to pay any government employees this week’,” noted Patrick Gourley, associate professor of economics at the University of New Haven, in an interview with Government Executive, a publication that covers the federal government.
    

    What happens to Medicare and Medicaid?
    

    Both could be disrupted, potentially impacting care for older Americans on Medicare and low-income households that rely on Medicaid. A combined 158 million people are enrolled in Medicare and Medicaid — almost half the U.S. population.
    

    “Get your health care now. Don’t wait until June 1,” Sara Rosenbaum, a health law and policy professor at George Washington University, told Axios. “My message to the world is, don’t wait on that orthopedic surgery.”
    

    Would it impact my credit cards?
    

    A breach would likely raise the broader cost of borrowing by pushing up interest rates, including on credit cards.
    

    That would hurt. Credit card annual percentage rates are already at record highs, reaching almost 21%, the highest level since the Federal Reserve began tracking APRs in 1994. And consumers already owe almost $1 trillion on their charge cards, up 17% jump from last year and a record high.
    

    How would a debt ceiling breach impact mortgage rates?
    

    It could get even more expensive to buy a home because a default would force the Treasury Department to pay higher interest on its bonds to convince investors to stick around — and mortgage rates and other borrowing costs tend to follow Treasury rates.
    

    Mortgage rates could surge to 8.4% by September, up from 6.9% now, if the debt ceiling is exceeded, according to Zillow. That would make a mortgage payment on a typical home 22% more expensive and likely “freeze” the market, the real estate company said.
    

    Would the U.S. fall into a recession?
    

    Even a short debt ceiling breach of a week or less would likely tip the economy into a recession, Mark Zandi, chief economist of Moody’s Analytics, said in a recent report. A short breach would be “enough to undermine the already-fragile U.S. economy,” Zandi wrote. 
    

    But if the breach lasted longer than that, the U.S. could fall into a “deep recession,” with employers cutting 7.8 million jobs and the jobless rate jumping to 8%, or about double its current level, Zandi predicted.
    

    How long could a debt ceiling breach last?
    

    Given the disruption — which would impact anyone with a 401(k) or who relies on government programs — it’s likely that the uproar would force the White House and Congress back to the negotiating table to quickly find a solution, experts say. 
    

    “If we have default, the dislocation would be so great that the default wouldn’t last long because the pressure would be so intense to fix the situation,” Roth of Wilmington Trust said. “It would only last a couple of days.”
    

        
    


    


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    Consumer sentiment tumbles to six-month low in May on renewed fears about U.S. economy
    
			
    Consumer sentiment tumbles to six-month low in May on renewed fears about U.S. economy
    
			
    

    

    The numbers: The University of Michigan’s gauge of consumer sentiment fell to a preliminary May reading of 57.7 from an April reading of 63.5. That is the lowest level since November last year. 
    

    Economists polled by the Wall Street Journal had expected a May reading of 63.
    

    

    Americans view on near-term inflation moderated slightly in May. They now expect the inflation rate in the next year to average about 4.5%. Inflation expectations had surged to 4.6% in April from 3.6 in March.
    

    Inflation expectations over the next five years rose to 3.2% from 3% in April. That’s the highest reading since 2011. 
    

    Key details: A gauge that measures what consumers think about their financial situation — and the current health of the economy — fell to 64.5 from 68.2 in April.
    

    Another measure that asks about expectations for the next six months moved down to 53.4 in May from 60.5 in the prior month. 
    

    Big picture: Consumer spending is the engine of the economy. If households grow concerned about the outlook and pull back, it could push the economy into recession.
    

    And Federal Reserve officials won’t be pleased to see expectations of inflation over the long-term increase. They view expectations as a key source of future inflation pressure.
    

    What UMich said: “Consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff,” the press release said. In the most serious debt-ceiling standoff in 2011 consumer sentiment plummeted to recession levels but recovered quickly when the crisis was averted.
    

    What are they saying? “While we don’t place too much weight on the relationship, if sustained, the latest plunge in consumer sentiment would be consistent with falling consumption in the second quarter. That would be alongside the probable hit to consumption from tightening credit conditions,” said Olivia Cross, assistant economist at Capital Economics.
    

    Market reaction:  Stocks
    
        DJIA,
    
        -0.18%
    

            SPX,
    
        -0.22%
    
       were lower in volatile trading on Friday while the yield on the 10-year Treasury note
    
        TMUBMUSD10Y,
    
        3.437%
    
      rose to 3.41%. 
    

    

    


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    U.S. April producer prices rise 2.3% over past year, smallest increase since January 2021
    
			
    U.S. April producer prices rise 2.3% over past year, smallest increase since January 2021
    
			
    

    

    

    The numbers: U.S. producer prices rose 0.2% in April, the Labor Department said Thursday. 
    

    Economists polled by the Wall Street Journal had forecast the PPI would rise 0.3%. 
    

    In the 12 months through April, the PPI increased 2.3%. It follows a 2.7% gain in March. This is the lowest rate since January 2021.
    

    Key…
    
    

    

    


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    What Tech Companies Must Do Weather Downturns and Layoffs | Entrepreneur
    
			
    What Tech Companies Must Do Weather Downturns and Layoffs | Entrepreneur
    
			
    

    
    Opinions expressed by Entrepreneur contributors are their own.  
    

    

    Economic downturns persist in recent times in the face of the Russian-Ukrainian war, rising inflation and unpredictable markets. In the U.S. technology sector, giants such as Amazon, Apple, Microsoft and Google are laying off thousands of workers. As of the end of March, there are around 131,000 tech workers in the U.S. who have been laid off so far in 2023.
    

    Despite these short-term measures to strengthen organizations against the global economic slowdown, companies still need to find ways to manage existing technical debt and innovate at the same time. We’ve seen skillful companies leverage managed development to not only enhance existing systems but also tap into niche skill sets they otherwise would not have access to.
    

    Related: 3 Things to Do When Layoffs Are Looming
    

    Keeping up with the workplace evolution
    

    Economic distress, marked by massive layoffs and fears of a recession, has both workers and companies wary of what’s to come. The economic slowdowns that could turn into a full-blown crisis could further accelerate not only changes in the industry but the ongoing evolution of the workforce itself.
    

    Since the Covid-19 pandemic, there has been a cultural shift in how we work. Alternative work modes such as the fully remote distributed teams setups and hybrid work schemes are continually being embraced by companies in various industries and are here to stay.
    

    A March 2023 report by Pew Research Center showed that working from home still has a steady hold on U.S. workers. About 35% of workers are staying home full-time, 41% have settled into hybrid work, and those who rarely work at home or never are at 12% each. The majority of the surveyed hybrid workers noted that their setup had helped their ability to balance work and personal life, a notable positive lifestyle change for many.
    

    Embracing the evolution with “managed networks”
    

    Accepting, embracing and adapting this evolution of the workplace will be essential for companies to weather the coming storms. The transition might be daunting for some companies, but with the right strategic investments in innovation, it can be more of a seamless process and a positive experience for both management and workers.
    

    There has been rapid growth and shift in the gig economy due to strong demand for outsourced services from professional service firms and large enterprises. Gig workers increased by 34% in 2021 alone.
    

    One alternative work mode that is gaining traction is “managed networks,” which combine different outsourcing types to ensure a pool of individual talents or teams that are tailor fit for the project. Managed talent networks enable companies to assemble on-demand teams with specific competencies, ensuring that they can immediately produce output that is in line with the company’s goals. These competencies can consist of core skills such as engineering-focused, design-focused, project management-focused or a multitude of combinations based on needs.
    

    Tech companies can turn to managed networks to get managed software development talent and teams with project managers that can provide flexibility and agility. These talent networks can keep up with tech demands much like non-full-time equivalent (non-FTE) workers, without necessarily expanding their existing in-house workforce.
    

    Even as U.S. markets are down, globalizing the workforce can enable companies to enjoy the perks of hiring innovative-thinking workers from different backgrounds and creative methods — a massive pool of expertise from wherever in the world.
    

    Companies can utilize the flexibility that comes with a workforce from different parts of the world with a more digital and remote mindset. Because of the differences in time zones and work methods, global talents can ensure that their services are more efficient and optimized.
    

    Other advantages of managed networks for development teams include round-the-clock work, efficiency, faster delivery of quality projects and flexibility for teams and the organization.
    

    Adapting new technological advancements in managing remote working teams — such as communication and collaboration tools — can improve individual capabilities, increase individual productivity and performance, as well as augment the efficiency of the team. According to Constellation Research, tech projects made by and assisted by outsourced talents and teams are staffed 30% more efficiently on average and reduce customer dissatisfaction by half compared to traditional industry projects.
    

    Related: How I Overcame My Fear of Hiring Outsourced Developers
    

    Tech advancements and innovation are critical for outsourced development teams
    

    Technology advancements such as video conferencing/meeting platforms, collaboration tools and artificial intelligence (AI) can now accommodate different types of remote workforces and are already reshaping entire industries.
    

    These advancements in communication technology have made the modern workforce more agile, collaborative and dynamic as exhibited by outsourced tech workers, especially for managed networks. With outsourced teams using these digital tools, operations are conducted smoothly, team members are on the same page, and leaders can efficiently manage and delegate tasks for faster delivery of quality projects.
    

    Strategic investments in innovation during crises could help companies take the edge against their competitors. Modern business models that utilize a more open approach to hiring not only have access to the best talent but are also enjoying other benefits such as affordability due to flexibility that enables the company to scale up without heavily adding to your bottom line.
    

    Riding the digital acceleration
    

    What some would see as a dire condition actually presents an opportunity for companies to adapt and future-proof their businesses and services. A Mckinsey & Company survey showed that more than three-quarters of organizations agreed that the then-emerging Covid-19 crisis will create new opportunities for growth back in 2020.
    

    Post-pandemic, this is truer than ever as the World Economic Forum sees a “transition point” for the entire tech industry, with investors looking toward companies that have solid fundamentals while creating meaningful change toward future growth and profitability. This situation shows how essential innovation is — not only getting the work done but also remaining competitive and at the top of the pack.
    

    Companies must lean into the modern ways of working and tap the unmatched potential of the remote workforce. By investing in innovation and integrating new platforms, companies can be at the forefront of the era of workplace revolution, one that emphasizes flexibility and agility in the face of adversity.
    

    Digital acceleration that takes a step-by-step approach to innovation is the new playbook for companies to drive tangible results while also de-risking and increasing the speed-to-value of investments, according to the WEF.
    

    This digital acceleration has overridden the industry’s digital transformation drive, especially with changes not only within the industry but the entire workforce due to the economic situation the world finds itself in. It is up to companies to decide if they want to invest and innovate and be ahead of their competitors.
    

    Related: Is Outsourcing the Right Decision for My Business?
    

    


     Cory Hymel
    

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