What’s happening? (July 24-30)
Meta’s not-so-good day
Wednesday was not a great day for the company formerly known as Facebook. First came a lawsuit from the Federal Trade Commission and then the company announced its first decrease in income since it was made public. The FTC, led by Lina Khan, one of Big Tech’s Biggest Critics, is suing Meta to stop it from buying Within, a virtual reality company that would help Meta CEO Mark Zuckerberg make the leap into the metaverse. In the lawsuit, the FTC accused Meta of trying to buy a company that it should have to compete with. Meta responded that the agency had put together a case “based on ideology and speculation.” The company later reported that its second-quarter revenue was down 1 percent from a year earlier, results Zuckerberg put in the context of an “economic downturn that will have a broad impact” on digital advertising. Still he seems relentless in advancing his vision for the next era of his business, and he has told employees that anyone not on board can walk away.
A recession? Or not?
The economy contracted for the second consecutive quarter, meeting the criteria of a common definition of a recession. Accounting for inflation, gross domestic product fell 0.2 percent in the second quarter, the Commerce Department said Thursday. But while watching closely, GDP isn’t the only indicator of a serious recession: Economists use a wide set of data to determine the condition of the economy, including measures of income, spending, and employment, with most holding that the United States America is not in a recession. And seen through the eyes of Federal Reserve officials, the latest GDP figures are a sign that their efforts to slow the economy are working. But the outlook is certainly darkeningparticularly with the housing market slowing and a measure of layoffs on the rise.
The Fed’s Oversized Rate Increase
The Federal Reserve pressed ahead with its single-minded pursuit of reining in rising prices last week while raising interest rates. three-quarters of a percentage point. Policymakers unanimously agreed to the large size increase, which followed one of the same size in June, the largest since 1994. The Biden administration has said that it relies heavily on the Federal Reserve to control inflation. But a day after the Fed meeting, President Biden announced that he had reached an agreement with Senator Joe Manchin III of West Virginia to advance a package known as the Inflation Reduction Law. Cecilia Rouse, who chairs Biden’s Council of Economic Advisers, said the plan would make “a significant contribution” to the administration’s efforts to ease inflation.
Whats Next? (July 31 to August 6)
Booming oil profits
While every other sector struggles with factors like rising production costs, shortages, supply chain grunts, changing consumer habits, dollar strength against foreign currencies, the list goes on, global markets have a clear winner: energy. shell last week reported $11.5 billion in profit for the second quarter, another record for the company, as high oil and gas prices fueled by the war in Ukraine led to huge profits. ExxonMobil and Chevron did the same, posting record earnings for the quarter, and BP is likely to release similar results on Tuesday. The company wrote off $25.5 billion for withdrawing from Russia in the first quarter, but celebrated an “exceptional” performance overall, more than doubling its earnings from a year earlier. By the end of this week, the world’s major oil companies will have collectively reported adding tens of billions of dollars to their bottom line, as high energy prices shake economies.
Another closely watched jobs report
Job growth in June was higher than expected, indicating a still booming job market and a growing economy. But that was not necessarily a good result for the Fed, whose officials are looking at a variety of economic data for signs that the economy is slowing from its fast pace. On the other hand, a strong employment report is a useful messaging tool for the Biden administration when faced with questions about whether the economy is in a recession. The July jobs report comes out Friday, and economists will have a new number to look at as they try to figure out where the economy stands.
Inflation is also high in Britain
At their last meeting in June, Bank of England officials suggested they might be less modest about rate hikes in August after a series of quarter point raises. At the moment its benchmark rate is 1.25, the highest since 2009. But as elsewhere, inflation in Britain is galloping at its fastest pace in decades, and some central bank officials are concerned they are not moving fast enough to address it. In June, three of nine people on the rate-setting committee voted for a half-point increase, but most rejected them. Policymakers may now be feeling pressure from other central banks that are acting more aggressively.
What other thing?
JetBlue Airways and Spirit Airlines announced plans to merge a day after the spirit broke off merger talks with Frontier Airlines. A Trader Joe’s in Hadley, Massachusetts, became the company’s first of more than 500 stores. unionize. Instagram reversed some of its product changes after celebrities joined a user-led backlash.