It seems that the 1970s are making a comeback in the United States, with mass layoffs, a lack of jobs, stagflation, and a slew of bankruptcies indicating a potential repeat of the Great Depression. Many businesses have managed to survive until now by taking out loans, but with money getting increasingly expensive, commercial loans are becoming too costly for many companies to afford. This is making it difficult for businesses to grow and thrive.
For a long time, the Federal Reserve (Fed) kept the interest rates low, making it easier for people to take out loans. This led to a surge in loan activity. However, eventually, too much money was circulating in the economy, causing inflation to skyrocket. As soon as the Fed raised rates, the U.S. quickly entered into a recession.
This is just part of the economic cycle – the boom and bust. It is caused by the actions of the Fed and can only be resolved when the government stops draining the economy of its resources and allows it to return to normal, allowing for capital to build up again. Until then, the economic downturn is likely to continue.
Allianz Trade predicts a significant increase in business bankruptcies in the United States in 2023, with a forecast of a 38% increase due to the tightening of monetary and financial conditions.
According to historical data and given the magnitude of the bubble, the current recession has the potential to last four to seven years.
Bed Bath & Beyond Bankruptcy
Home goods giant Bed Bath & Beyond has announced that it is running out of money and may need to file for bankruptcy protection due to declining sales and fewer shoppers in its stores, according to NPR.
The news has had a significant impact on the company’s stock price, which dropped more than 20% as soon as markets opened.
The company expects to report a 33% decline in sales compared to last year for the quarter ending after Black Friday, with losses expected to increase by almost 40% to $385.8 million.
Regal Parent Company Bankruptcy
Additionally, Cineworld Group Plc, the world’s second-largest cinema chain, has announced plans to close many more theaters following the shuttering of 23 sites since filing for bankruptcy last year.
According to a legal adviser in a restructuring hearing on Wednesday, these cuts represent about 5% of the company’s theater count in August. Cineworld currently has 478 sites remaining.
Amid these bankruptcies, layoffs have skyrocketed to record highs.
In 2022, over 91,000 tech workers lost their jobs. In the first week of 2023, Amazon and Salesforce announced layoffs of 18,000 and 7,000 workers, respectively. This is 25,000 in the first week of 2023 alone, indicating that the layoffs may be accelerating.
Meta eliminated 11,000 jobs, accounting for roughly 13% of its workforce, and will extend its hiring-freeze policy through the first quarter of 2023.
Vimeo is also planning to reduce its global full-time workforce by 11%, according to a recent regulatory filing.
Goldman Sachs revealed that it would lay off 8% of its workforce.
Many other companies have also announced hiring freezes and major layoffs.