The former head of one of the nation’s biggest retailers is confirming Americans’ fears about the worsening state of the economy, detailing how inflationary pressures are here to stay.
“Inflation has been just a killer on the consumer, especially food and rent,” former Walmart U.S. President and CEO Bill Simon told Fox News Digital on Wednesday. “It’s just brutal. It’s very difficult to overcome.”
Simon, who joined Walmart in 2006 just before the country saw its last major economic crisis, explained how inflation poses a bigger risk to Americans’ wallets when compared to a looming recession.
“Until we start seeing significant shifts in the labor market, it’s hard to envision what a recession looks like. We’ve not had a full employment recession in the country ever,” the former CEO said. “And so I think with employment levels still relatively high and wage growth year-on-year relatively high, there’s more inflationary pressure than there is recessionary pressure.”
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This past week, the Fannie Mae Economic & Strategic Research Group’s economic and housing outlook report detailed expectations of a recession by the end of 2023. But Simon noted analysts’ mild recession predictions and the country’s history of recovery.
“Let’s say the unemployment rate goes up to 8% or 6%… that means that 6% of the population is affected because they lost their job or don’t have a job. But if we have 20% food inflation, 100% of the consumers are out 20%,” Simon pointed out.
“And so it’s a much bigger impact,” he continued. “Inflation has a much bigger impact on the consumer.”
According to the former CEO, there’s typically strong shifts in spending patterns during times of economic stress. Shoppers turn to less expensive proteins like chicken, and purchase smaller quantities as opposed to buying in bulk.
Consumers will also “trade down” when choosing which retail store to shop at.
“Part of the trade-off is you got to take the hassle of the crowd in the big box [retailers]. And in exchange for that hassle, you get a better price,” Simon said. “In better economic times, people choose less crowds and smaller buildings… when the economic times get difficult, Walmart gets crowded. You see people who would have shopped somewhere else in the big box for the price.”
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Simon also recalled previously conducting a focus group with moms on healthy food choices, when one mother humbly confessed she couldn’t afford skinless chicken breast and instead opted for the affordable Happy Meal that comes with a toy.
“There’s some heartbreaking things you see,” he reflected. “I’ll never forget standing in the store at midnight on the first of the month and watching people fill up their shopping carts, and wait ’til midnight to check out when their EBT cards got charged.”
Despite the gloomy outlook on inflation, Simon admitted to being an “eternal optimist” about the American dream and the Federal Reserve’s ability to get inflation down.
“I think we’re going to see at least a couple more quarter points for the year, and I would expect that based on what the Fed has said,” the former CEO noted. “And by the way, they deserve the credit for helping us get the corner turned here… they’re taking inflation as a priority.”
But he’s still waiting for some relief towards Americans’ two largest disposable income costs: food and housing.
“Those are the two things that have not been brought under control just yet. And so those would be the areas where I would try to focus like what you know, what can the Fed do? What policy?” Simon said. “Potential policy is probably more local than it is federal.”
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While politics “creates a lot of noise” around the inflation debate, Simon advised Americans that the best way through inflation is to take action.
“In the end, we can manage our budgets, we can cut our expenses, we can figure out a way to make it through to the other side, because inflation is driven by more demand than there are goods,” the former Walmart exec said. “So as soon as we start slowing our rate of consumption in certain areas, prices will start coming down.”