Former Walmart CEO Bill Simon warned Americans of the negative impact that corporate layoffs could have on the struggling U.S. economy.
“It’s crazy right now. We’re stuck in this loop of wage, product, and cost inflation. And it’s just that cycle keeps going. And I think, unfortunately, an inevitable byproduct of some of the Fed’s moves and as the necessary medicine we have to take to kind of cool things down and get the inflation back under control on some of these layoffs that are coming,” said Simon.
While the labor market remains one of the few bright spots in the economy, there are hints it is beginning to abate. Furthermore, along with several high-profile layoffs in the tech industry over the past month, the economy added 223,000 jobs in December, the smallest gain in two years.
Officials with the Federal Reserve say they expect unemployment to continue to climb due to their vigorous interest rate hike campaign. The latest projections from the Fed’s December meeting show officials expect unemployment to rise to 4.6% by the end of the year, which is up from the current rate of 3.5%.
When asked if unemployment “has to happen” to cool inflation efficiently, the former Walmart president was asked if the layoffs put the country “further down the road” to help get the economy back on track.
Wage inflation contributing to overall U.S. inflation issue
“Theoretically, yeah, I agree with you, Will. But the problem is, at the same time, this wage inflation is going on. For example, last week, Walmart announced they’re raising the minimum wage, their starting wage, their starting wage to $14 an hour. That’s a 17% increase,” said Simon.
Simon said, “Food costs have gone up 23% in the last two years. So now, wages have gone up 17% at Walmart, 25% at Delta for pilots, and 25% for the rail industry. And wage increases like that sort of counteract the employment layoffs we’re starting to see. And so, there’s a lot going on.”
The former president of Walmart continued to bring a unique problem to light about how the U.S.’s immigration problem has impacted the workforce.
“We need workers, but we need workers we can employ that are in the country legally. What’s happening now is you’re letting people in that can’t participate in the workforce but do increase demand. So, you have increased demand, driving prices up without the workforce to be able to service it. So, it’s a complicated factor. Certain inputs are trying to solve inflation, but you have counteracting forces that kind of mess that up,” Simon said.
The former CEO warned consumers could be in a “world of hurt” if the administration doesn’t take action on the U.S.’s inflation issue soon.
“I think the most critical thing that’s going to happen in ’23 is we have to get this inflation under control. Another year of high single-digit, low double-digit inflation, and we’re going to be in a world of hurt because inflation hurts 100% of the population,” said Simon.
