Dow to cut costs due to economic uncertainty
MID-MICHIGAN (WNEM) – Dow said it will be cutting costs to save $1 billion in 2023.
The company’s steps to improve its bottom line include laying off 2,000 employees.
Dow said the move, in part, is in response to near-term macroeconomic uncertainty.
“Traditionally, a source of economic slowdown and recession are a spike in energy prices. So, it seems like that’s what’s driving the Dow layoffs,” said Chris Douglas, a professor of economics at the University of Michigan Flint.
Douglas said the fact that Dow is announcing job cuts is not a great sign for the economy. He said tech companies like Amazon, Google, and Facebook made layoffs recently because they over-hired during the pandemic, but Dow’s employee reduction is different because they appear to be driven by higher energy prices, especially in Europe, as the war in Ukraine continues.
“I think energy prices, coupled with the federal reserve, really has people nervous about what 2023 is going to look like,” Douglas said. “But it’s always impossible to know for sure whether or not a recession is coming.”
The federal reserve has raised interest rates multiple times in an effort to avoid a recession, which Douglas said would have a greater impact in the Great Lakes State.
“If history is any guide, the mid-Michigan economy, the Michigan economy in general, just gets hit much more hard than the national economy does because Michigan’s economy still is disproportionately focused on manufacturing durable goods like automotive,” Douglas said.
The U.S. economy did grow almost three percent during the last quarter of 2022, and Douglas said that is a reason for optimism.
“Even a spike in energy prices, raising interest rates, that might signal we might be in a recession,” Douglas said. “But the fact that growth was pretty strong at the end of 2022, maybe means that a recession really isn’t around the corner.”
He said if the war between Russia and Ukraine gets under control, and if the federal reserve doesn’t raise interest rates too high, it is likely that a recession can be avoided this year.
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