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What FedEx issuing an economic warning means for Memphis' economy

FedEx said it will aggressively cut costs by closing over 90 office locations and five corporate offices, deferring new hires and operating fewer flights.

MEMPHIS, Tenn — Some fear troubling times for Memphis-based company FedEx as the global shipping giant announced Thursday that it would be closing 90 stores. 

The company also said it would put off making new hires and cut flights at FedEx Express. The thought of a looming global recession is what the company's CEO Raj Subramaniam has argued is reflected in taking these steps.

RELATED: FedEx warns it will miss profit target as demand slumps

Dr. John E. Gnuschke is Director of the Sparks Bureau of Business and Economic Research and the Center for Manpower Studies and Professor of Economics at The University of Memphis. 

"Anything that's negative that happens to FedEx is also very negative for the Memphis economy," Gnuschke said. "If it's a minor disaster for them, it's a major disaster for us."  

Late Thursday FedEx slashed its earnings forecast, announcing a shortfall of half a billion dollars. The company expects business conditions to worsen in the weeks ahead. 

High operating expenses getting the blame for dragging down financial results in the most recent quarter.

"FedEx's global hub is here and its headquarters are here," Gnuschke said. "As a result of that, they have a huge local impact—not only as a result of their employees and their earnings but as a result of all of their supplies."

FedEx, which employs approximately 30,000 people across the city of Memphis said it will aggressively cut costs.

Some economists are saying that as demand declines, shipping reductions should be expected. 

"The announcement from FedEx that their revenues were less than expected and their earnings per share were less than expected was a result of reductions in demand globally and those reductions are exactly what we should expect to see," Gnuschke said.

Still, Gnuschke said he doesn't believe a full-on recession will ultimately occur. 

"We are going to have a global slowing and slowing of economies around the world and that may make a recession in terms of shippers, like FedEx," he said. 

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