Who needs food delivered when they are now comfortable going out to eat? Hiring slowdowns or small rounds of layoffs at companies in a handful of industries - no matter how high-profile - is normalization, not recession. Folks are spending less time at home or on social media and more time at gyms and on public transit. Several firms have announced hiring freezes or layoffs, including Meta (formerly Facebook), Netflix, Uber, and Peloton. Correspondingly, the stock market is experiencing a sharp decline.Ī similar phenomenon is playing out in the labor market. Now this dynamic is working in the opposite direction, and those same companies are seeing major slowdowns. As these companies raked in money, the market boomed along with them. One reason stock markets did so well initially in the pandemic is that tech and tech-adjacent firms that benefited from people staying at home - online shopping, streaming entertainment, social media - make up an outsize portion of the major US stock indexes. This transition back to services and experiences has dealt a serious blow to another big winner of the pandemic: the tech industry. Tech tanks - but tech isn't the whole economy And a shift in spending does not signal a recession. That's the real story here: Spending is shifting, not declining. Executives at Target, whose stock collapsed by nearly 40% after reporting worse-than-expected earnings in mid-May, said during a call with Wall Street analysts that consumers' spending was shifting "more toward experiences and going-out categories," or things like luggage, beauty products, and clothing. People don't research expensive overseas trips when they are worried about a recession at home.Īnd people are still buying things - they're just different kinds of things. Data from the travel-booking site Kayak indicates that flight search interest on May 22 was up 22% compared with the same day three years ago and that searches for international flights are at fresh highs. They're going out to restaurants, heading to the movies, and taking to the skies. They're just shifting where they spend.Īmerican consumers are picking up the pace across the service industries. This also makes sense: If people aren't at home as much, they no longer need all that home-related stuff.īut this does not mean that consumers are suddenly spending a great deal less overall. Recent reports from retailers suggest that consumers continue to spend less on goods. But spending on goods peaked over a year ago and has declined by about 5% since March 2021. This makes intuitive sense: People were spending a lot of time at home, so they bought stuff they could use there. The first reason for all the recession hullabaloo is a misguided conflation of the slowdown in spending on durable consumer goods - big-ticket items like washing machines, couches, laptops, and cars - with a broader recession.Īs people were stuck inside during the pandemic, spending on physical goods skyrocketed. But while these industries may face a kind of localized "recession," the US economy is still expanding, and the likelihood of contagion that would lead to a true recession remains low. The losers of this latest shift - most notably tech companies and those big-box retailers - are prominent, and their problems are generating disproportionate interest. Now that we've reopened the economy, many of the winners from the early part of the shutdown and recovery are seeing their fortunes change. The pandemic was an economic shock that produced clear winners and losers. Layoff announcements, hiring freezes, and slowdowns at big tech companies like Facebook, Snap, and Uber are on the rise, and the venture-capital community is souring on the outlook for once high-flying growth companies.īut for all the doom and gloom, I don't think we're headed for a recession. The stock prices of major retailers like Target, Walmart, and Lowe's have declined substantially after earnings stumbles. Everywhere you look, it seems like there's a new headline warning of a recession.