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Why Business Wants a Recession
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Give Jerome Powell credit for candor: The Fed chairman admits that his policy of increasing interest rates to fight inflation might push the economy into a recession. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be,” he recently told reporters.

If it does, one sector won’t be entirely displeased: employers.

According to the Deloitte accounting firm, a typical Fortune 500 company spends $1 to $2 billion a year on payroll, averaging between 50% and 60% of total spending. Controlling labor costs, unsurprisingly, is a top priority for employers.

In the boom-bust cycle of labor-management negotiations, the post-pandemic Great Resignation has triggered a labor shortage, a phenomenon we rarely witness and that tends to fizzle out fast. Workers are quitting and retiring early, tanking the labor force participation rate. Those who remain enjoy the upper hand at interviews that feel like the job prospect is sizing up the company rather than the other way around. Labor shortages are driving up salaries, shortening hours, prompting signing bonuses and forcing bosses to accommodate people who prefer to work at home. Just 8% of office workers in Manhattan are back in the office a full five days a week.

The most recent data published, for June, finds that wages and salaries soared 16.8% on an annualized basis as benefit costs went up 14.4%.

Workers, angry and resentful after decades of frozen real wages and merciless downsizing, are becoming demanding. This reversal of a power dynamic in which workers were supplicants and bosses called the shots has also strengthened labor unions that had been losing membership for years.

This, some CFOs may be thinking, calls for a recession.

Company profit margins are at a 70-year record high, up 25% each of the last two years as the result of raising prices during the pandemic. Which means that, even allowing for an 8% inflation rate, a generic S&P 500 corporation should easily be able to ride out the average 26% earnings decline suffered in the most recent typical recessions that took place in 1990, 2000 and 2020. (A bigger crisis like the 2008-09 Great Recession, which reduced earnings by 57%, is another matter.)

No corporate officer would voluntarily reduce earnings. Or would they, in order to get something more valuable: regaining leverage over labor?

Traditional conservative allies of big business are openly arguing in favor of higher unemployment. “The recent drop in work and labor force participation — particularly among young workers — is troubling (my emphasis),” writes Rachel Greszler in a white paper for the Heritage Foundation, the right-wing think tank. “Job openings, at 11.3 million, remain near record highs, and record percentages of employers report unfilled positions and compensation increases.”

Greszler summarizes: “Continued low levels of employment (sic) will reduce the rate of economic growth, reduce real incomes and output, result in greater dependence on government social programs, require higher levels of taxation, and exacerbate the U.S.’s already precarious fiscal situation.”


Workers, of course, feel like they can finally breathe. High demand for labor means that they can quit positions where they feel unappreciated and/or undercompensated, pack up and move to another state and create a healthier balance between their family and work lives. The current situation is anything but “troubling.”

Executives at employers like Apple, Tesla and Uber have had enough of workers calling the shots. They’re demanding that people get back to work — at the office — or find another job. “A quickly shifting employer-employee dynamic could give companies the ammunition to take a harder line against the full-time work-at-home arrangements that many employees have pushed for, according to corporate policies experts. In fact, they say more companies are likely to start pressing staffers to come back to the office — at least a few days a week,” reports CNBC. “The hybrid workforce is not going to go away, but the situation where employees refuse to come to the workplace at all is not likely to hold,” Johnny C. Taylor Jr. of the Society for Human Resource Management tells the network.

Perhaps no one has told CEOs that at-home work empowers them, too. Rather than hiring security goons to escort laid-off workers past their terrorized colleagues, companies can memory-hole the condemned by deactivating their remote-access passwords. Who’ll notice one less square on the Zoom screen?

I’m not subscribing to a dark Marxist suspicion that CEOs, the Fed and other powers-that-be are conspiring to slam the brakes on an economy that would otherwise be coming in for a soft landing as pent-up consumer demand from the pandemic naturally ebbs, in order to return their recently empowered employees to their rightful status as wage slaves. Powell and his fellow governors are doing what comes naturally to government, treating a disease based on a diagnosis that is close to a year out of date and, reasonably, including wage increases as part of their calculus of what constitutes a major driver of the inflation rate.

Business, however, does see what’s coming. If the captains of industry aren’t worried enough to be calling their pet politicians to demand an end to interest-rate hikes, one reason might be that they see a silver lining to the next recession.

Ted Rall (Twitter: @tedrall), the political cartoonist, columnist and graphic novelist, co-hosts the left-vs-right DMZ America podcast with fellow cartoonist Scott Stantis.

• Category: Economics • Tags: Federal Reserve, Inflation, Unemployment 
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  1. Mac_ says:

    Tend to think anyone who supposedly has more than fifty or a hundred million is part of the schemes, generally. And of course there’s many others who steer and scheme who have less, though some part of power by cabaler input. When one sees the whole, nothing is coincidence. By jerking some people back to offices, keeps from finding own identity, or forming alliance with others, which doesn’t happen much in ‘jobs’. Other angle example ‘lockdowns’ and masks, obvious to separate, isolate, so people don’t make own groups and scheme or act against the schemers. Though should be said, they’re everywhere, few in every neighborhood. And, ignorant go alongs may be considered as in same, ignorance helps the bad schemes. In any event the bold section is extra point.

    On supposed money and benefitting from recession, again not coincidence, though, Ted says he’s not subscribing to conspiracy, as he describes conspiracy. Not into drinking really, but if Ted wants to try a small bottle of hard cider maybe he can say the word conspiracy. Then, we can saddle up some horses and go jail us some bankers or corporate schemers. What do ya say Ted ?

    Appreciate the article.

  2. Mac_ says:

    – just a note, posted comment which didn’t come back through with edit panel.

  3. By this logic the Black Death was the greatest thing to happen since sex
    and Wonderbread ™ i.e. here´s a lump of salt;
    for the desired effects TPTB would have to dismantle the social safety net
    (what they refer to as the “hammock”) which is no way in hell of happening
    without bringing down the dollah (and with it the Empire) – I doubt they want to
    go there; a World War might fit the bill but is dicey (the runup to the
    last one is disturbingly similar but the Usual Suspects will not stay high and
    dry this time).

  4. But Business is good! Don’t you know? Business is Capitalism! And Capitalism is Good! Along with Business!

    So get your head screwed on straight. Business and Capitalism are good. Period. Because reasons.

  5. Bro43rd says:

    Let’s face it, what is currently practiced in the usa is fascism, a form of communism. A gov managed economy is not capitalism, not the type espoused by free-market Austrian economists anyway. This economy is a product of communism/fascism/socialism, not free-market capitalism.

    Ok now that we got that straight, what the American public needs to do is Go Vote Harder, LOLOLOLOL.

  6. I want a recession — or, to be more precise, I want an end to inflation almost regardless of the consequences.

    Yet I don’t have any employees at all. I’m retired, with a fixed income, and suddenly, I’m getting poorer very fast.

    It’s not funny, and anyone who rationalizes permitting inflation to continue can go fuck themselves.

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