The CEO of a luxury furniture retailer has said it’s “crazy” to think the US economy isn’t in recession, as household wealth fell by a record $6.1 trillion in the second quarter.
“I don’t know, people keep saying, are we in a recession? We are in a recession,” Gary Friedman, the chief executive of RH, formerly known as Restoration Hardware, said in a talk with investors on Thursday.
“Anyone who thinks we’re not in a recession is crazy. The housing market is in recession and has only just begun. So it’s probably going to be a tough 12 to 18 months in our industry,” he said.
The US economy shrank for two consecutive quarters in the first half of 2022, an informal sign of a recession, but President Joe Biden continues to insist the economy is strong.
He and his administration have also tried to refute claims that the US is experiencing an economic contraction. That has sparked another culture war as the president’s cheerleaders — including some media outlets — have tried to defend his insistence that all is well with the U.S. economy, despite crippling 8.5 percent inflation.
“I don’t know, people keep saying, are we in a recession? We are in a recession,” RH CEO Gary Friedman said in a conversation with investors on Thursday
The US economy shrank for two consecutive quarters in the first half of 2022, an informal sign of a recession
The issue has become fiercely politicized, with Biden pointing to the robust job market as a sign of strength, and his critics citing rising inflation and weak growth as signals that a recession is already underway.
Despite his stark warning, Friedman remained optimistic about Thursday’s earnings call, and the company’s shares rose 4.4 percent in Friday’s session.
“Like, we’ve been through storms before. We’ve been through recessions before. We’ve been through the Great Recession before,” Friedman said. “We know what to do. We know how to play this game.’
RH, like other furniture stores, has been hit hard by inflation, which has severely curtailed discretionary spending as consumers spend more of their household budget on essentials such as food and gas.
Friedman said a recession of any magnitude was predictable because of the Federal Reserve’s aggressive path of rate hikes.
In its fight against inflation, the Federal Reserve has raised its key rate four times in a row, to 2.5 percent from near zero in March, and is expected to make another jumbo hike later this month.
The central bank is trying to cool inflation without crashing the economy, a path that appears to be narrowing with each new bad economic news.
President Joe Biden continues to insist the economy is strong, citing robust labor market
On Friday, the Fed sent such a negative signal in a report showing that household wealth plunged a record last month as the bear market wiped out trillions in savings.
Total US household wealth, defined as assets minus debt, fell to $143.8 trillion at the end of June, from $149.9 trillion at the end of March, the second consecutive quarterly decline.
The quarterly decline of $6.1 trillion was the largest on record, the Fed’s quarterly snapshot of the national balance sheet showed.
In the second quarter to its lowest point in a year, as a bear market in stocks far outweighed further gains in property values, a Federal Reserve report found on Friday.
Through June, Americans’ collective wealth had fallen by more than $6.2 trillion, from a record $150 trillion at the end of 2021.
The net asset decline in the second quarter was about $30 billion greater than the previous record drop two years earlier, as the onset of the COVID-19 pandemic rocked financial markets.
Total US household wealth, defined as assets minus debt, fell $6.1 trillion in the second quarter, the largest drop ever, mainly driven by stock market declines
However, that drop – in the second quarter of 2020 – still stands as the largest percentage at 5.2 percent, compared to 4.1 percent in the most recent report.
The latest decline was led by a $7.7 trillion drop in stock market value as stocks entered a bear market in the first half of the year.
Markets fell sharply in the first half of the year on concerns about rising inflation and the Fed’s aggressive response to rate hikes.
Stock market losses surpassed $1.4 trillion in real estate gains.
Household debt growth slowed to 7.4 percent year-on-year, from 8.3 percent in the first three months of the year, while corporate, federal, state and local government debt all rose.
Federal government debt rose 5.6 percent year-on-year in the second quarter of 2022, from 10.2 percent year-on-year in the previous quarter.