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CEOs are preparing for a recession... and they don't think it will be short

CEOs are preparing for a recession… and they don’t think it will be short

(CNN) – Senior corporate executives are concerned about the idea that the US economy could have a soft landing after a series of historically high interest rates before. Federal Reserve to combat inflation.

According to a survey of 400 leaders of major US companies conducted by the consulting firm KPMG, 91% of them expected that Recession In the next twelve months. Additionally, the survey, released Tuesday, found that only 34% of those CEOs think the recession will be mild and short-lived.

“There has been a lot of uncertainty over the past two and a half years,” said Paul Knopp, president and CEO of KPMG US, referring to the Covid-19 pandemic and concerns about inflation. “Now, we have another recession looming.”

Companies are preparing for a recession and are planning to cut costs. A great way to cut costs? job cuts. KPMG noted that more than half of CEOs are considering downsizing to deal with the recession.

But there are some (slightly) signs of hope.

Although most CEOs think the recession will be more than a modest setback, many CEOs think they are in a better position to deal with such harsh economic realities now than they were in 2008.

The collapse of Lehman Brothers, the global financial crisis, and the Great Recession doubled the unemployment rate, from 5% to 10%, between the beginning of 2008 and the end of 2009.

“There is long-term optimism about the US economy and the prospects for their institutions,” Knopp said. “Companies see themselves as more flexible and better prepared.”

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It’s also worth noting that companies recently faced something of a recessionary rehearsal when the economy briefly sank into recession two years ago during the onset of the pandemic. The unemployment rate jumped to a record high of 14.7% in April 2020.

5 Keys to Prepare for a Recession 7:29

But Knopp said chief executives were clearly concerned enough about the economy’s short-term outlook to make changes to some of its long-term spending plans. One area that could be particularly affected is investments in ESG (Environmental, Social and Governance) efforts.

Knopp noted that although several CEOs said they believe their business will improve in the long term due to environmental, social and governance initiatives, they may need to halt some of these efforts over the next year to cut costs.

He added that companies realize there is likely to be a higher risk of cutting too many jobs and cutting spending too much.

Companies cannot overreact in the short term because that can create problems in the long term. “The pandemic continues to raise urgent concerns for businesses,” Knopp said. “Companies expect the economy to bounce back quickly after the slowdown.”

Knopp said CEOs will pay close attention to the midterm elections and the political landscape in Washington in general before making long-term investment plans.

“There is real doubt about the outcome of the midterm elections and the possibility of imposing stricter laws and tax regulations,” he said.

Concerns among the leaders of large companies appear to be shared by managers of smaller companies as well.

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A survey of midsize companies last month showed accounting and consulting firm Marcum LLP and Frank G College. More than a quarter of these CEOs said they have already begun laying off workers or plan to do so within the next 12 months.