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    Home»Business»US faces stagflation due to labor shortage, government spending: FedEx founder Fred Smith
    Business

    US faces stagflation due to labor shortage, government spending: FedEx founder Fred Smith

    By September 19, 2022No Comments3 Mins Read
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    US faces stagflation due to labor shortage, government spending: FedEx founder Fred Smith
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    US faces stagflation due to labor shortage, government spending: FedEx founder Fred Smith

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    The US economy is in the middle of an unusual “stagflation” period and lacks enough workers to meet spiking demand because of the Biden administration’s policies, FedEx founder and chairman Fred Smith said.

    Smith delivered his grim view of the economy after stocks tanked on FedEx CEO Raj Subramaniam’s warning of a looming “worldwide recession.” The FedEx chairman blamed government programs that poured money into an overheated economy for sapping demand from the labor market.

    “We’re sort of in a stagnation, stagflation period, because you have this tremendous demand, but we’re still one percentage point, in terms of lower labor participation rates today, than we were before the pandemic,” Smith said during an appearance on Fox Business Network last Friday.

    “At the same time, you simply do not have the workers to meet the demand that’s been juiced by the printing of this money,” Smith added. “It’s exactly like sitting in your car and putting your foot on the accelerator and the brake at the same time.”

    The term “stagflation” refers to periods in which inflation stays persistently high even as economic growth slows or becomes stagnant. Periods of stagflation often result in higher unemployment.

    FedEx
    FedEx recently delivered a profit warning and withdrew its full-year guidance.
    SOPA Images/LightRocket via Gett

    FedEx is often seen as a bellwether for the overall health of the US economy due to its broad array of customers across many business sectors.

    Smith pointed to COVID-19 pandemic era stimulus spending as well as more recent initiatives, such as the bipartisan bill on physical infrastructure projects, the Democrat-backed Inflation Reduction Act and President Biden’s sweeping student loan forgiveness program.

    The FedEx founder also slammed the Biden administration’s energy policies, arguing they contributed to an inflation surge.

    “It can’t be good, because at the end of the day, everything is going to hit the Fed and the Fed can’t turn this around until labor and demand come into balance,” Smith added.

    FedEx
    FedEx’s CEO warned of a worldwide recession last week.
    Getty Images

    The Federal Reserve is expected to implement another super-sized interest rate hike following its two-day meeting this week. Investors are pricing in an 82% probability that the Fed will hike by three-quarters of a percentage point for the third straight time, though the market also sees an 18% chance of an even larger full-point hike.

    The labor market has remained historically tight in recent months, with the national unemployment rate hovering below 4% and labor participation on the rise. However, the Fed’s policy tightening has sparked fears that layoffs could become more widespread.

    Subramaniam exacerbated fears of an economy slowdown after FedEx indicated its results would fall far short of expectations due to a decline in global shipments.

    When asked on CNBC if he felt a worldwide recession was imminent, Subramaniam said “I think so.”

    “We are a reflection of everybody else’s business, especially the high-value economy in the world,” the FedEx CEO told CNBC.

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