Should CFOs Prepare for a Recession?

While unemployment is up, healthcare still added 55,000 jobs in July.

As the nation reacts to the news of a possible recession coming off on an underwhelming jobs report, CFOs must stay on top of domestic and worldwide economics to know how it might impact their business.

The Big Picture: What To Know

Typically, if roughly 200,000 jobs are added each month it shows that the labor market is in good standing and most likely won’t see a recession. However, Friday’s BLS report showed an eerie slowdown in job growth. Only 114,00 jobs were added in July, marking a big drop from 206,000 in June, and far below many economists’ expectations.

Major concerns about the job market surfaced as the unemployment rate rose by 0.2 percentage points to 4.3%. With the Sahm rule being triggered, financial executives everywhere are on-edge.

The labor market is vulnerable right now, and with an upcoming election and the Federal Reserve’s goal of 2% inflation, economists are speculating that a rate cut may be in order. If not, a recession could be underway.

Approximately 7.2 million people are currently unemployed, up from 5.9 million last year. The labor report also indicates that wages are stagnating, and workers are often using part-employment to supplement.

Healthcare jobs are generally considered “recession-proof" because of consistent need, and the industry added 55,000 jobs with big increases seen in home health (+22,000), and hospitals (+20,000), nursing and residential care (+9,000). But healthcare and government were virtually the only two sectors that added a notable number of jobs.

The CFO Checklist

While many CFOs had high hopes for profitability in 2024, the road ahead may be bumpier than expected. CFOs can strategize to adapt to a shifting economy, but only when they balance financial safety nets with precise growth plans that will benefit and add to their organization.

If the Federal Reserve decides not to cut rates in pursuit of 2% inflation, many Americans will see financing challenges for things like cars and homes. This coupled with stagnant wages will put extra strain on employees that CFOs need to be aware of.

CFOs will need to carefully strategize growth opportunities, because without this they risk losing relevancy as a business. They should also focus on creating solid safety nets for their organizations by creating a stout reserve fund.

Lastly, CFOs should also look at auditing their revenue cycle to increase profitability, as well as diversifying revenue streams as much as possible.