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Economy

Big Tech Continues Its Surge Ahead of the Rest of the Economy – The New York Times

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While the rest of the U.S. economy languished earlier this year, the tech industry’s biggest companies seemed immune to the downturn, surging as the country worked, learned and shopped from home.

On Thursday, as the economy is showing signs of improvement, Amazon, Apple, Alphabet and Facebook reported profits that highlighted how a recovery may provide another catalyst to help them generate a level of wealth that hasn’t been seen in a single industry in generations.

With an entrenched audience of users and the financial resources to press their leads in areas like cloud computing, e-commerce and digital advertising, the companies demonstrated again that economic malaise, upstart competitors and feisty antitrust regulators have had little impact on their bottom line.

Combined, the four companies reported a quarterly net profit of $38 billion.

Amazon reported record sales, and an almost 200 percent rise in profits, as the pandemic accelerated the transition to online shopping. Despite a boycott of its advertising over the summer, Facebook had another blockbuster quarter. Alphabet’s record quarterly net profit was up 59 percent, as marketers plowed money into advertisements for Google search and YouTube. And Apple’s sales rose even though the pandemic forced it to push back the iPhone 12’s release to October, in the current quarter.

On Tuesday, Microsoft, Amazon’s closest competitor in cloud computing, also reported its most profitable quarter, growing 30 percent from a year earlier.

“The scene that’s playing out fundamentally is that these tech stalwarts are gaining more market share by the day,” said Dan Ives, managing director of equity research at Wedbush Securities. “It’s ‘A Tale of Two Cities’ for this group of tech companies and everyone else.”

The results were strong despite increasing antitrust scrutiny from regulators. Last week, the Justice Department filed a lawsuit accusing Google of cementing the dominance of its search engine through anticompetitive agreements with device makers and mobile carriers. Facebook faces a possible antitrust case from the Federal Trade Commission.

The companies’ advantages are becoming more pronounced in an economy starting to dig out from the coronavirus pandemic. On Thursday, the Commerce Department said U.S. economic output grew 7.4 percent last quarter, the fastest pace on record, but remained below where it was in the last pre-pandemic quarter.

That slow return to health is also providing momentum to companies that suffered early in the pandemic, like Twitter, which reported on Thursday that revenue rose 14 percent in the third quarter as advertisers started to return. Twitter’s stock dropped about 14 percent in after-hours trading on Thursday, a reaction that analysts attributed to slow user growth.

Big Tech’s third-quarter boom could look modest when compared with the final quarter of the year. For Apple, it’s when consumers buy newly released iPhones. And the year-end shopping peak means lots of customers turning to Amazon for gifts, while advertisers rely on Google and Facebook for digital ads during the holidays.

The pandemic-fueled surge in online shopping pushed Amazon to a record for both sales and profits in the latest quarter.

Sales were $96.1 billion, up 37 percent from a year earlier, and profits rose to $6.3 billion.

The quarter did not include the usual boost from Prime Day, Amazon’s yearly deal bonanza, which was delayed to October. And the profit increased during a building boom, with Amazon expanding its fulfillment infrastructure by 50 percent this year. The company added almost 250,000 employees in the quarter, for the first time surpassing more than a million workers.

The lucrative Amazon Web Services division grew 29 percent as companies continued their shift to cloud computing.

Amazon said sales could reach $121 billion in the fourth quarter because of the confluence of Prime Day, the holiday shopping season and the turn to online spending.

The delay in the iPhone 12’s release meant Apple would face a tough comparison with the same quarter last year, which included sales of the iPhone 11. As a result, iPhone sales dropped more than 20 percent in the quarter.

A delay in releasing the new iPhone, which customers lined up to buy in Manhattan, didn’t stop Apple from increasing overall sales last quarter.
Credit…Michael M. Santiago/Getty Images

Yet Apple’s overall sales still rose 1 percent to $64.7 billion, showing the increasing strength of other parts of the company’s business.

Apple’s services segment, which includes revenues from the App Store and offerings like Apple Music, increased 16 percent to $14.5 billion. Sales rose 46 percent for iPads, 29 percent for Mac computers and 21 percent for wearables.

Profits fell 7 percent to $12.7 billion, partly because the company spent more on research and development.

“There are lots going on here, and everything is going incredibly well,” Luca Maestri, Apple’s finance chief, said in an interview.

Facebook’s revenue for the third quarter rose 22 percent from a year earlier, to $21.2 billion, while profits jumped 29 percent to $7.84 billion. The results surpassed analysts’ estimates of $19.8 billion in revenue and profits of $5.53 billion, according to data provided by FactSet.

Facebook had strong results despite a wide-ranging boycott by advertisers this summer over issues of hate and toxic speech on the site. Though the grass-roots campaign, Stop Hate for Profit, rallied many of the top advertisers on Facebook to reduce their spending, the overall effects were brief.

The company continued gaining users as well. More than 1.82 billion people used the Facebook app every day, up 12 percent from a year earlier, it said. More than 2.54 billion people now use one or more of Facebook’s family of apps — Instagram, WhatsApp, Messenger or Facebook — daily, up 15 percent from a year earlier.

After its first-ever decline in quarterly revenue in the second quarter, Alphabet rebounded with its highest-ever profit. The strength came from across Google, with search advertising revenue growing 6 percent and YouTube ad spending rising 32 percent. Google’s cloud computing business grew 45 percent.

When advertisers slowed spending with Google this year as Covid-19 started to spread, Alphabet’s business took a significant hit. But as the economy has improved and businesses found their footing, advertisers have returned.

Alphabet posted a net profit of $11.25 billion in the third quarter as revenue rose 14 percent to $46.1 billion. Ruth Porat, Alphabet’s chief financial officer, said the improved profitability reflected efforts to cut costs during the economic downturn, including a hiring slowdown.

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Kuwaitis go to polls as economy poses challenge for new emir – The Guardian

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By Ahmed Hagagy

KUWAIT (Reuters) – Kuwaitis vote in legislative polls on Saturday as the Gulf state faces its worst economic crisis in decades, posing a challenge for the government’s often stormy relationship with parliament, that has hampered fiscal reform.

Turnout is expected to be lower than in past elections due to concern over COVID-19, which along with low crude prices, has battered state finances in the wealthy oil-producing nation. Low turnout could strengthen the showing of tribal, Islamist and other candidates who can rally supporters to head to polling centres, analysts said.

“Kuwaiti opposition who boycotted (previous) polls are moving to run and vote, and this could strengthen their presence,” said Kuwaiti political analyst Mohamad al-Dosayri.

More than 300 candidates, including 29 women, are vying for 50 seats in the Gulf’s oldest and most outspoken assembly with legislative powers. Critics say parliament has long stalled investment and economic and fiscal reform in the cradle-to-grave welfare state.

Frequent clashes between the cabinet and assembly have led to successive government reshuffles and dissolutions of parliament. The emir, who has final say, picks a prime minister who selects a cabinet. The current government is due to resign after the elections.

Sheikh Nawaf al-Ahmad al-Sabah took the reins as emir in September following the death of his brother.

Campaigning, which took place mostly on social media and local TV channels due to COVID-19 measures against gatherings, has focused on the economy, corruption and demographics in a country where foreigners make up the bulk of the workforce.

“The issues are the same – health, education, housing – as none of these have been resolved yet,” government employee Hamad al-Otaibi, 43, told Reuters ahead of the elections.

The nearly $140 billion economy is facing a deficit of $46 billion this year. A priority will be overcoming legislative gridlock on a bill that would allow Kuwait to tap international debt markets.

OPPOSITION

Sheikh Nawaf has called for unity to face challenges at home and in a region experiencing heightened tension between Kuwait’s larger neighbours Saudi Arabia and Iran.

Late ruler Sheikh Sabah al-Ahmad in 2012 broke the hold of opposition groups on parliament by using executive powers to amend the voting system, sparking large protests.

Under the old electoral system, voters were allowed to cast ballots for up to four candidates, which the opposition says allowed alliances that partly made up for the absence of political parties, which are officially barred.

The system introduced in 2012 allows votes for only a single candidate, which the opposition says makes alliances difficult.

Kuwaiti opposition figures have proposed electoral reforms and a pardon for dissidents, many in self-exile, to the new emir.

“There have been some reforms in the judiciary and the Emiri Diwan,” or court, said a Kuwaiti politician who asked not to be named. “We heard echoes of more reforms after elections.”

(Reporting by Ahmed Hagagy in Kuwait; Additional reporting by Aziz El Yaakoubi in Dubai; Editing by William Mallard)

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New Businesses Starting At Record Rates Despite The Pandemic's Effect On Economy – NPR

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The coronavirus pandemic is still raging on, with dramatic effects on the economy. Despite that, new startups are booming.



LULU GARCIA-NAVARRO, HOST:

OK. You may be surprised to hear there’s currently a startup boom in the United States. Despite the pandemic – or maybe because of it – new businesses are starting at record rates. Here’s Greg Rosalsky of NPR’s Planet Money.

GREG ROSALSKY, BYLINE: In 2019, Roberto Ortiz, a veteran software designer, was working hard on a new app with a couple of friends. They designed it. They developed it. They pitched the idea to investors and began raising money. Ortiz even moved his wife, his dog and his 3-month-old baby from Denver to San Francisco so they could launch it. By then, it was early 2020. But there was a problem.

ROBERTO ORTIZ: We were building a platform that connects wholesale food providers to restaurants.

ROSALSKY: (Laughter) Oh, no.

Oh, no because the pandemic was about to destroy the restaurant industry.

ORTIZ: So picture me and my co-founders trying to sell technology to restaurant owners when COVID just shut down their business.

ROSALSKY: The business was ruined. On Zoom call after Zoom call, they debated what to do next. And then it hit them. What if they made a better version of Zoom, one that would be a stronger replacement for high-powered business meetings, product launches or conferences at fancy hotels.

So Zoom is sort of like the Holiday Inn or something. And then like…

ORTIZ: It’s the Motel 6, yeah.

ROSALSKY: (Laughter).

ORTIZ: Exactly.

ROSALSKY: Ortiz and his co-founders decided they could build something prettier and fancier than Zoom, like the Ritz-Carlton for virtual events. And with months of hard work, they built it. It’s called Welcome. They officially launched a couple weeks ago. They’ve got numerous clients and over 30 employees. They’ve already raised $12 million. They’ve come a long way since March.

ORTIZ: It’s one of those things where we have to pinch ourselves often.

ROSALSKY: There are a lot of entrepreneurs pinching themselves these days. Welcome is just one of 4 million new businesses registered in 2020. Welcome to the startup boom. Economist John Haltiwanger has been helping the Census Bureau track all this. When it comes to new business applications, he says, they’ve never seen anything like this before.

JOHN HALTIWANGER: It’s the highest level on record.

ROSALSKY: The biggest areas of growth are in e-commerce, online retail and online services, which makes sense. The pandemic has devastated activities that require being face-to-face. Most of us don’t want to shop at stores, travel on planes or do meetings in person. It’s like these new online businesses are growing out of the ashes of old brick-and-mortar businesses. Economists have a term for this. It’s called creative destruction. Nobody likes the destruction part. It means jobs lost and dreams dashed.

HALTIWANGER: What you don’t want to have happen is destruction and then no creation.

ROSALSKY: There weren’t a lot of businesses created during the Great Recession around 2008, and it slowed down the recovery. But the pandemic recession looks like it might be different. We don’t know if all these startups will fill the hole of all the jobs lost and destroyed businesses or if they’ll even survive after the pandemic ends. But Roberto Ortiz is banking on a new era for virtual interaction in the business world.

ORTIZ: And so is travel really necessary to close a deal? Is it really necessary to gather 5,000 people in one place, or are there alternate ways of getting the same outcomes using and leveraging technology?

ROSALSKY: There’s definitely been a lot of destruction in 2020. Hopefully we’ll look back and also see it as a year of creation.

Greg Rosalsky, NPR News.

(SOUNDBITE OF DYE O’S “ARISING”)

Copyright © 2020 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

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A $900 Billion Plan Would Help the Economy, but Not Fix It – The New York Times

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news analysis

A $900 Billion Plan Would Help the Economy, but Not Fix It

While a compromise package gaining steam in Congress would provide urgent help to the economy, some people and businesses would be left out in the cold.

The framework of a $908 billion stimulus plan includes several types of assistance that economists have been calling on Congress to approve for months.
Credit…Anna Moneymaker for The New York Times
  • Dec. 4, 2020, 6:07 p.m. ET

The economic recovery, slowing for months, is in danger of going into reverse. That’s why a growing list of economists, business lobbyists and other advocacy groups are urging lawmakers to rally around the $908 billion aid package currently gaining bipartisan support in Congress.

A plan of that size would fall short of doing everything that economists argue Congress should do to help workers and businesses during the coronavirus pandemic. But they said that if lawmakers could get the details right, Congress should do it anyway.

“It’s within the range where you could argue it does enough good that it would be worth taking it,” said William E. Spriggs, a Howard University economist who served in the Labor Department under President Barack Obama. “But it leaves a ton on the table, and still leaves us with a big problem going forward.”

The $908 billion compromise is not even a legislative proposal yet. It is a bipartisan framework, assembled by a group of senators led by Susan Collins, Republican of Maine, and Joe Manchin III, Democrat of West Virginia. Many of its details are still being negotiated, including how the government ought to distribute more aid to small businesses.

Once the bill is complete, its success is not assured: Senator Mitch McConnell of Kentucky, the majority leader, has stopped short of endorsing it, and so has President Trump, who would need to sign any legislation approved in the lame-duck congressional session. But Speaker Nancy Pelosi of California has backed it as a starting point for renewed negotiations, and President-elect Joseph R. Biden Jr. said Friday that he was “encouraged” by the effort.

Experts say the plan would provide relief to several battered corners of the economy. It includes nearly $300 billion for small-business aid, $180 billion for unemployed workers, and $160 billion for state, local and tribal governments.

The plan wouldn’t help everyone who needs aid, and the support might not last long enough to bridge the economy to the rebound that is expected to come when coronavirus vaccines are widely distributed. And much depends on the details, particularly when they come to Americans who have been unemployed for months and small businesses that struggled to tap government programs early in the pandemic.

But if the plan was passed soon, it would send money out quickly. And with virus cases rising and economic gains stalling, a growing number of politicians are willing to accept such a compromise.

“You get most of the way there, you don’t turn around at the end,” said Gov. Mike DeWine of Ohio, one of several Republican governors who has called for more federal aid. “We can’t stop now, and I guess I would say that to my friends in Congress: We need your help one more time here. Help get us through what’s going to be a very tough winter.”

November employment data released by the Labor Department on Friday underscored his point. Job growth slowed to 245,000, the weakest monthly gain of the recovery so far. The number of people trapped in long-term unemployment rose to nearly four million. Restaurants and retailers, whose rehiring of furloughed workers helped power the rebound in earlier months, cut jobs in November. The number of people who have lost their jobs permanently rose, the latest sign that the crisis will leave lasting economic scars.

“I do feel a greater sense of urgency now, especially after seeing the jobs report,” said Karen Dynan, a Harvard economist and former Treasury Department official in the Obama administration. “We’re really starting to see the cracks now.”

Credit…Oliver Contreras for The New York Times
Credit…Erin Schaff/The New York Times

Perhaps the top goal for the aid package is preventing millions of families from losing their only source of income the week after Christmas.

As many as 13 million Americans are receiving benefits under two programs that expanded and extended the existing unemployment insurance program. Those programs, created by Congress in the spring, are set to expire at the end of the year — an outcome that members of both political parties have said they want to avoid.

The aid package being discussed in Congress would extend both programs, while also reviving the extra unemployment benefit that expired over the summer, most likely at half the original $600-a-week level. But depending on how the negotiations go, it may not further extend eligibility for people who are close to the end of their benefits already.

Putting money into the pockets of the unemployed could be good for the broader economy: Research has found that unemployment benefits are among the most effective forms of economic stimulus because recipients are likely to spend rather than save the money. And by helping families avoid foreclosures, evictions and debt defaults, unemployment benefits can prevent the financial damage from spreading.

But the most compelling argument may be not economic but humanitarian: Without the money, many families could go hungry, become homeless and face other hardships.

A line for food aid in Los Angeles last month. Nearly 10 million people are set to lose their benefits at the end of the year, unless Congress can approve a new stimulus package.
Credit…Bryan Denton for The New York Times

“If households are in financial catastrophe, then we have a moral obligation as a country to help households regardless of what their spending or not spending does to the aggregate economy,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution.

Money in the proposal would similarly provide a lifeline to some small businesses that risk closing for good amid weak demand between now and when vaccines become available. Even large companies could be hurt if many smaller firms go under, which is one reason large business groups have called for immediate aid to small companies.

“Jobs created by small businesses impact big businesses’ ability to sell to those people,” said Suzanne Clark, the president of the U.S. Chamber of Commerce. “So we’re really worried about the totality of the ecosystem and the number of small businesses just hanging on by a thread.”

But many business groups warn that the compromise plan does not include enough money, potentially leaving some companies without aid, in a repeat of the government’s initial round of Paycheck Protection Program loans in the spring. Lawmakers could again find themselves almost immediately facing pressure to allocate more money to the program.

The structure of the aid is unlikely to provide a long-term bridge for certain types of businesses, including many in the hospitality industry, that might not return to pre-pandemic levels of activity for months or years.

The deal would provide money to state and local governments, though the $160 billion being discussed is a small fraction of the $1 trillion that Democrats initially proposed last spring.

State and local aid has been a major sticking point in negotiations, with Mr. McConnell dismissing it as a “blue-state bailout.” But Republican-led states face some of the biggest revenue gaps.

States and local governments, which have been battered by pandemic-related costs and collapsing tax revenues, have already cut more than 1.3 million jobs, and much deeper cuts loom. Those cuts could have both short- and long-term consequences. A new round of public-sector layoffs and furloughs, combined with slowing private-sector hiring, could derail the precarious recovery. And cuts to schools, public transportation and other services could make it harder for the economy to regain momentum once the pandemic has passed.

Even if Congress does reach a deal before the end of the year, Mr. Biden warned Friday that lawmakers would need to spend more once he took office. “The country’s going to be in dire, dire, dire straits if they don’t,” he said.

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