What’s in a Name?

What’s in a Name?

Anna Rathbun, Chief Investment Officer

“That which we call a rose by any other name would smell just as sweet.” Romeo and Juliet

Because I am not a talented bard, I am borrowing William Shakespeare’s eloquent expression on the meaninglessness of names. If I were to replace a few words in that famous quote, we would have “…that which we call a recession by any other name would feel just as bad.” And that is where we are being hit the most in the economy right now… how consumers feel. Real wages are shrinking because the consumer inflation rate is higher than our raises. In particular, the prices of energy and food are much higher than a year ago, and when things that sustain life cost more, we must make sacrifices in other areas. Maybe we look for ways to save on those essentials by purchasing store brands – e.g. instead of Heinz, perhaps Krogers Ketchup. Maybe we change our behavior and scale back some discretionary purchases… 2 new outfits instead of 3 from that “back to school” sale. In addition, rates are going up, which makes it more expensive to buy cars, homes, and anything else we need to finance. So maybe we put off these purchases for the future and drive our cars for another year, save a little more for that down payment, and put up with that annoying washer/dryer set.

The general impact of inflation on consumers is to spur more consumption because we know that the price will only go up if we wait. And if wages also keep up, then you have inflation that is pulled by demand. But what we have today are prices that increased significantly in a short span of time while wages have lagged. Under these conditions, we are finding that consumers cannot consume more even if they want to. We are seeing personal savings rates fall and credit card balances skyrocket as Americans deal with falling real wages. So no matter what we call it, it feels like a downturn in economic trend. And certainly, sentiment indicators like University of Michigan Consumer Sentiment Index are telling us that Americans are hurting.

The thing about consumers is that how they feel and therefore behave will have effects on corporate earnings. And when earnings are affected, corporations may change plans about their own discretionary spending, business investment, and ultimately their labor pool. This is why the headline unemployment rate is a lagging indicator – most businesses know that talent is difficult to replace and would consider layoffs as a last resort, especially in the recent skill labor shortage. Therefore, it is misleading to use the unemployment rate to assess the health of the economy in real time. So are we in a recession? From where I sit, it certainly feels like we are heading into one, if not in one already. For a technical definition, we will have to wait for the National Bureau of Economic Research to tell us. But by the time they figure it out, we may be already be on the road to recovery.

About the Author

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Anna Rathbun serves as the Chief Investment Officer for CBIZ Investment Advisory Services. Her tenure with the firm has spanned economic and market research, portfolio construction, and creating insights in investment themes to share with the investment community. Anna began her career in investments at Wellington Management, and subsequently, Harvard. She has served as a Managing Director for a registered investment advisory firm where she specialized in alternative investments. She is a graduate of Harvard University with a B.A. in Economics.

For more information visit: www.cbiz.com/retirement

Investment advisory services provided through CBIZ Investment Advisory Services, LLC, a registered investment adviser and a wholly owned subsidiary of CBIZ, Inc.

The information included in this update is provided for informational purposes only and should not be construed as investment advice. The views expressed are those of the author based on the data available when this update was written and are subject to change based on market conditions or other factors. CBIZ Investment Advisory Services, LLC disclaims any liability for any direct or incidental loss incurred by applying information supplied in this update. Please contact your financial representative with any questions pertaining to the information in this update.


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What’s in a Name?https://www.cbiz.com/Portals/0/RPS/Images/Stock Images/iStock-131957725.jpg?ver=_Q39WRiKdPLYWZiYiOrgQA%3d%3dhttps://www.cbiz.com/Portals/0/RPS/Images/Stock Images/iStock-131957725.jpg?ver=_Q39WRiKdPLYWZiYiOrgQA%3d%3dThe general impact of inflation on consumers is to spur more consumption because we know that the price will only go up if we wait.2022-08-05T16:00:00-05:00The general impact of inflation on consumers is to spur more consumption because we know that the price will only go up if we wait.Regulatory, Compliance, & LegislativeInvestment AdvisoryRetirement Plan ServicesCOVID-19Yes