Costco CEO: Consumers ‘not doing bad’

Costco CEO Craig Jelinek on Monday said that he has seen evidence that consumers “could be getting cautious” but projected optimism as a number of economists warn of an impending recession.

“Overall, I think the consumer is not doing bad,” Jelinek said in an appearance on CNBC’s “Squawk on the Street.”

Despite the Federal Reserve’s recent interest rate hikes, which aim to cool off demand by making borrowing more expensive, the unemployment rate remained at 3.6 percent in June, and the country added 372,000 jobs.

Those job numbers are slower than last year’s growth but remain above pre-pandemic levels.

“As you can see, unemployment is down significantly,” Jelinek added. “If people want to work, they can work. So my view at the moment: things aren’t so bad.”

The low unemployment levels have been matched with prices rising at rates not seen in roughly 40 years. Costco itself has raised prices on its fountain sodas and chicken bakes in its cafes.

As the Fed vows to continue raising rates to curb rising prices, many economists are warning of a recession in the coming months due to supply-side constraints. 

The Biden administration has looked to cast off pessimistic outlooks. Commerce Secretary Gina Raimondo on Sunday argued that many are “talking ourselves into a recession.”

Those supply issues are particularly pronounced for commodities like oil and grain, which have been affected by Russia’s invasion of Ukraine.

But the nationwide average price for a gallon of gasoline fell to roughly $4.68 on Monday, down from recent weeks when prices topped $5 but well above price levels a year ago, according to AAA.

When asked about the recent drop in gas prices on Monday, Jelinek told CNBC he thinks it will bring relief to the “lower cohort.” Many of Costco’s locations offer gas stations for members.

“I am not sure if there is a reason for it to be down at the moment, other than there [are] less gallons being purchased at the moment,” he said. “Oil still fluctuates every time we turn around.”

Jelinek said his stores have also seen changing spending patterns, like a reduction in sales on computers and other hard goods. 

He noted how consumers bought many of those products in mass during the pandemic, so the recent decline could be a result of those sales moderating to normal levels, but he acknowledged the possibility of more reserved consumer behavior.

“The consumer could be getting cautious,” Jelinek said.