Millions might have consented to stay at home this spring in the interest of social distancing, but they certainly didn’t log off.
Even though economic activity fell at a heart-stopping annual rate of 32.9 percent in the second quarter, which started in April, some of tech’s biggest players are powering through the crisis, according to a flurry of updates on the most-recent quarter late Thursday.
• Amazon saw its quarterly net profits double to $5.2 billion while revenues shot up 40 percent to $88.9 billion as people relied on the e-commerce leader more than ever during the shutdown.
• Facebook fared nearly as well with earnings up 98 percent to $5.2 billion while revenues rose 11 percent to $18.7 billion.
• Apple’s increases were less significant, but the overall numbers were still bigger and a sign of continued strength in a rapidly shrinking economy. The iPhone-maker’s profits rose 12 percent to $11.3 billion as sales inched up 10.9 percent to $59.7 billion.
• Google-parent Alphabet was the only one of the four to show some signs of retreat, although it still managed to produce more big-time profits. The search giant’s net earnings fell 30 percent to $7 billion as sales dipped 1.7 percent to $38.3 billion.
The general show of corporate might could actually work against the companies, which are coming under increasingly antitrust scrutiny in Washington, D.C.
Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, Alphabet’s Sundar Pichai and Apple’s Tim Cook were all taken to task in a House of Representatives hearing Wednesday, where lawmakers pushed the chief executive officers on how their companies throw their weight around.
Each in turn defended their businesses as innovation powerhouses that help other companies and users thrive, but clearly they have collectively and individually amassed an enormous amount of power and there are persistent questions about how they use it.
In opening the extraordinary hearing before the House Judiciary Committee, Rep. David Cicilline (D-R.I.) said: “Because concentrated economic power leads to concentrated political power, this investigation goes to the heart of whether we as a people govern ourselves or whether we let ourselves be governed by private monopolies.…Our founders would not bow before a king, nor should we bow before the emperors of the online economy.”
That online economy seems to be the only economy that’s really cooking right now.
To give some sense of just how sharp a 32.9 percent drop in GDP really is, Ben Herzon, senior economist at IHS Markit, noted, “the worst quarter of the Great Recession was the fourth quarter of 2008, when real GDP contracted at an 8.4 percent annual rate.”
The roller coaster that was the Great Recession now looks more like a kiddie ride.
GDP already fell 5 percent in the first quarter, which itself was a giant step down from three quarters of roughly 2 percent growth and enough to officially mark the beginning of a recession, with the National Bureau of Economic Research setting February as the most-recent peak of economic activity.
While the quirks of working staying closer to home have seen strengths at the big tech companies, none of it has been enough to offset a historic corporate shutdown.
Personal consumption expenditures fell 34.6 percent in the second quarter as people and businesses rearranged their priorities.
The trends that created that decline were enough to push Neiman Marcus Group, J.C. Penney Co. Inc., J. Crew Group, Ascena Retail Group and many more over the edge and into bankruptcy.
Even as many businesses have reopened and consumers and companies went into an uncertain kind of muddle-ahead mode, many workers have continued to struggle — trouble for retailers since employment is seen as the most important underpinning of spending.
Last week, 1.4 million people applied for unemployment benefits, a number that would have been unimaginably high before COVID-19, but has become routine.
At least 1 million people have applied for unemployment support since the shutdown started in earnest the week of March 15 — a 19-week run that’s seen as many as 6 million people declare joblessness in a single week.
Economists are projecting a significant bounceback in the third quarter GDP, although still not enough to get the economy back to year-over-year growth.
But even as the country has reopened, it’s been some tough sledding with worrying spikes of COVID-19 in Florida, Texas, California and elsewhere and closing certain sectors back down.
That has economists forced into trying their hand at being epidemiologists and looking at the virus as the only real economic indicator that matters right now.