Walmart’s Bill Simon Says Inflation Having ‘Much Bigger Impact’ on Households Than Looming Recession

Bill Simon, then-president and CEO of Walmart, speaks at an event in Chicago, Ill., on June 14, 2013. Scott Olson/Getty Images

As analysts ponder whether inflation in the United States has turned a corner following the latest data, a former Walmart U.S. chief executive says that inflationary pressures are here to stay longer and will hurt American households more than the looming recession.

Former Walmart U.S. CEO Bill Simon told Fox News in a recent interview that inflation is a bigger risk to U.S. wallets that the impending economic downturn.

“Inflation has been just a killer on the consumer, especially food and rent,” he told the outlet. “It’s just brutal. It’s very difficult to overcome.”

The former CEO said that it’s hard to imagine a recession happening unless there are big changes in the job market, which recent data shows remains quite tight.

The U.S. economy added 209,000 new jobs in June, the Bureau of Labor Statistics (BLS) reported recently, while the unemployment rate inched down from 3.7 percent to 3.6 percent.

“With everything that’s been thrown at the economy, it is remarkable that jobs creation has been as solid as it has been, and that the nation’s unemployment rate remains so low,” Mark Hamrick, senior economic analyst at Bankrate, said in a note.

At the same time, the number of job vacancies slipped below 10 million in May, separate BLS data showed. However, despite the sharp drop, the job opening levels remain higher than before the pandemic, suggesting the labor market remains tight.

“We’ve not had a full employment recession in the country ever,” Mr. Simon told Fox News, referring to the notion that an economic downturn is inconsistent with low unemployment and a high number of job openings.

“I think with employment levels still relatively high and wage growth year-on-year relatively high, there’s more inflationary pressure than there is recessionary pressure,” Mr. Simon said.

Inflation Still a Problem

The former Walmart CEO’s remarks about inflation remaining the bigger threat in the near term comes as the Consumer Price Index (CPI) eased in May to a reading of 4.0 percent.

While that’s a significant drop from the June 2022 blistering pace of 9.1 percent, it still remains well above the Federal Reserve target of around 2 percent and remains cause for concern among central bank officials.

At the same time, near-term inflation expectations in May edged up slightly to 3.0 percent and 2.7 percent at the three- and five-year-ahead horizons, respectively, according to the New York Fed, suggesting the inflation fight remains ongoing.

However, a recent research note from Fed economists shows that the cash surplus accumulated by American households over the past few years has now mostly evaporated.

This, combined with a growing number of recessionary signals, suggests that an economic downturn is looming and that the U.S. consumer may be too tapped out to offer meaningful relief for the economy.

Still, the pace of jobs growth remains strong by historical standards, which, added to data this week showing an acceleration in services sector activity, suggests that the long-forecasted recession could still be a ways off.

“The payroll numbers gave a whiff of weakening, but the labor market remains strong,” said Sean Snaith, director of the University of Central Florida’s Institute for Economic Forecasting.

“By no means is the Fed’s work done. We’re in a protracted battle against inflation, and nothing in today’s report suggests otherwise.”

Recession Signals Build

Data released this week confirms that the U.S. manufacturing sector has fallen deeper into recession territory.

U.S. factory orders fell into negative territory for the first time since October 2020, delivering a fresh sign that the U.S. manufacturing sector is suffering a slowdown.

The U.S. Census Bureau announced on July 5 that orders for U.S. manufactured goods declined by 1 percent in year-over-year terms in May, the first time in 31 months that the gauge has dipped below zero.

“The closer we get to the 2024 presidential election, the more the economy is slip slidin’ away,” economist Anthony Sanders, former director of MBS/ABS Research at Deutsche Bank, wrote in a blog post commenting on the numbers.

Separate data from the Institute for Supply Management (ISM) said in a July 3 report that its manufacturing purchasing managers index fell to 46 last month, the lowest reading since May 2020 and the eighth consecutive sub-50 reading.

Any readings below 50 represent recession, with all key sub-components in contraction, including the employment index, suggesting that layoff pressures are building.

The negative May manufacturing data extends a multi-month slump as experts warn that the economy faces obvious challenges.

“In fact, nothing is growing,” ING analysts wrote in a note. “The one bit of good news is that this is also the case for prices paid, which dropped to 41.8—the lowest seen since December. This suggests producer price inflation should soon drop below 1 [percent] year on year.”

Overall, the ISM data “suggest the economy faces clear challenges,” the ING team wrote.

The Producer Price Index—which reflects price changes by manufacturers, farmers, and wholesalers—fell by 0.3 percent month-over-month in May to an annualized reading of 1.1 percent, according to the latest data from the Bureau of Labor Statistics.

The decline in wholesale inflation comes after just over a year of Federal Reserve rate hikes, which have had a cooling effect on the economy, sparking recession concerns.

“The last three times ISM Manufacturing was this low, the U.S. economy was in or about to be in a recession,” Charlie Bilello, chief market strategist at wealth management firm Creative Planning, wrote in a post on Twitter. “You have to go back to 1995–96 to find a lower reading with no recession.”

The Federal Reserve Bank of Atlanta’s GDP nowcast, a real-time estimate of U.S. economic output, shows the economy growing in the second quarter at 2.1 percent on July 6, up from 1.9 percent on July 3.