When the president, the treasury secretary and other Biden administration officials insisted this week that the U.S. economy is not currently in a recession, they were mocked for weaseling out of bad news on a technicality. The Commerce Department announced Thursday that the broadest measure of economic activity, gross domestic product, fell for a second quarter in a row — meeting a widely held, though unofficial, definition of recession. It is true, as the Biden folks argued, that the nation’s official recession arbiter, the National Bureau of Economic Research, has yet to call one, because it relies on many more signals. Still, it sure sounded as if the Biden team was splitting hairs.
Over the past few days, though, I’ve spent more time than is healthy listening to CEOs expound on their businesses during quarterly corporate earnings calls. (What can I say? I’m a sucker for a good time.) And I was surprised by what I heard. The CEOs convinced me that the Biden people — not to mention Jay Powell, the chair of the Federal Reserve, who also said this week that a recession has probably not yet begun — have a point.
The economy is in a really weird place. There are definitely signs of trouble. Yet at some of the biggest companies in the country — especially in the tech industry — business is hardly all glum. And even at companies that are struggling, the numbers aren’t nearly as bad as investors had feared.
Consider some of the brightest spots: Qualcomm, the chipmaking giant, reported that despite that “challenging macroeconomic environment,” profits grew more than 50% over last year because of strong sales of its processors used in phones and automobiles. Ford reported that hefty sales of its SUVs and crossovers pushed its adjusted earnings before taxes and interest to more than triple from a year ago. Meanwhile Visa, Mastercard and American Express said Americans are still spending as if there’s no tomorrow. “We’re seeing no evidence of a pullback in consumer spending,” Vasant Prabhu, Visa’s chief financial officer, told investors.
Many on Wall Street had been especially worried about results from the behemoths of Big Tech: Apple, Microsoft, Amazon and Alphabet and Meta.
Then on Tuesday, Microsoft and Alphabet released their numbers and turned the narrative around. Alphabet said its revenue grew by 13% over last year — lower than usual for a money-printing machine like Google but not much less than analysts had been expecting and better than many had feared. Ives said Google’s not-too-bad results suggested that the online advertising market was holding up.
Microsoft’s results were also lower than analysts had been expecting, but investors were still thrilled by them, especially the 40% growth in Microsoft’s cloud services business. Because Microsoft’s core business is in providing tech services to large companies, its strong cloud number shed a positive light on the entire economy, Ives said.
On Wednesday, Meta put out what for it are some pretty dismal numbers; among other things, for the first time, the company posted a drop in quarterly revenue from the same period a year ago. But expectations had been very low for Facebook.
After the markets closed Thursday, Amazon and Apple reported their quarterly numbers. Guess what? They’re also mostly crushing it. Amazon said its cloud business grew by 33% over last year. Apple’s CEO told CNBC that the company expects revenue to “accelerate” next quarter.
This year, I argued that despite recent slowdowns, the reign of Big Tech was just beginning. As the economy softened over the course of the year, I began to doubt my bold prediction. But now I’m redoubling. Tech giants, like the rest of the economy, may soon face tougher times. But Amazon, Apple, Microsoft, Google and even Facebook are weathering difficult times much better than expected. Big Tech isn’t going away anytime soon.
Farhad Manjoo is a New York Times columnist.
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