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The economy shrank two quarters in a row...
July 29, 2022 View Online | Sign Up | Shop

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Good morning. To spare you from having to ask your group chat "What podcast should I listen to after binging the Beyoncé album?", we've got a good one: Bobby Flay, that is, Chef Bobby Flay, joined Business Casual to chat about creating new restaurant concepts and his new line of cat food, inspired by his own cat, Nacho.

Dog people can listen, too. Check it out.

Neal Freyman, Matty Merritt, Max Knoblauch, Joe Abrams

MARKETS

Nasdaq

12,162.59

S&P

4,072.43

Dow

32,529.63

10-Year

2.676%

Bitcoin

$23,915.70

Amazon

$138.94

*Stock data as of market close, cryptocurrency data as of 7:00pm ET. Here's what these numbers mean.

  • Markets: Despite recession alarm bells ringing in their ears (more on that in a sec), investors sent stocks flying for the second straight day. Amazon stock popped in late trading after posting the best earnings report of its Big Tech peers. Q2 revenue came in above forecasts, and despite posting its second-straight net loss, Amazon said it's making progress wrangling out-of-control costs.
  • Government: The House passed a bill that will boost US semiconductor manufacturing capacity and provide billions more in funding for scientific research. It now heads to President Biden's desk for his signature.

ECONOMY

Are we in a recession? Does it even matter?

Arrested Development scene Arrested Development/20th Century Fox Television

The US economy shrank at an annualized pace of 0.9% in the second quarter, according to government data released yesterday. Paired with the 1.6% drop in Q1, the economy has now contracted for two straight quarters.

That means we're in a recession, right?

Two straight quarters of declining GDP has been frequently used as a rule of thumb to describe a recessionary economy. The economy is supposed to grow, after all, and when it spends half of the year shrinking…it's likely a sign of a prolonged slump.

But the folks who actually make the official decision on recessions, the National Bureau of Economic Research (NBER), do not use the two-quarter rule as the definition. Instead, they follow a more "if it looks like a recession, swims like a recession, and quacks like a recession, then it probably is a recession" approach.

For its official definition, the NBER considers a recession a "significant decline" in economic activity. Not only that—the decline has gotta be deep, it's gotta be broad, and it's gotta last for more than a few months.

When deciding whether the economy is in a recession, the NBER looks to a variety of indicators (not just GDP) to understand the health of the economy, such as job growth, consumer spending, and industrial production. It's not a simple or transparent formula, for better or worse.

Right now, those indicators are flashing mixed signals

Inflation, and the Fed's rate hikes to tame it, have basically halted all forward economic momentum. Personal consumption, which accounts for the majority of the economy, grew at a measly 1% pace in Q2, the GDP report showed yesterday. And the once-booming housing market has entered a downturn.

On the other hand, the jobs picture remains strong, with unemployment holding at a low 3.6% rate for the past four months. On Wednesday, Fed Chair Jerome Powell cited the fact that the economy added 2.7 million jobs in the first half of the year to explain why he wouldn't consider the US economy to be in a recession. "There are too many areas of the economy that are performing too well" for that to be the case, he said.

Bottom line: Americans facing soaring prices for food, fuel, and housing probably don't need an elite group of economists to tell them that the vibes are bad right now. Whether we're technically in a recession or not, Americans say that the economy is their overwhelming concern this summer, a Monmouth poll showed.—NF

        

TOGETHER WITH GE

Introducing…GE times 3

GE

We may not have had a say in this name announcement, but that doesn't mean we're not super excited about this long-awaited reveal.

ICYMI: After a celebrated 130-year brand history, last fall GE announced plans to create three new, publicly traded companies, building on its heritage of innovation while marking a new beginning.

And now, these planned companies have names. So without further ado, meet the three ways GE plans to evolve from building a world that works to creating a future that does, too:

  • GE HealthCare signals continued confidence and trust from clinicians and will bring better outcomes for patients and health systems.
  • GE Vernova represents GE's portfolio of energy businesses and commitment to leading the global energy transition.
  • GE Aerospace points to a new era of possibility in aerospace and defense for the company's aviation business.

Visit GE.com to learn more.

WORLD

Tour de headlines

President Biden speaks with Xi Jinping of China Mandel Ngan/AFP via Getty Images

Xi tells Biden that Pelosi isn't welcome in Taiwan. President Biden ran up his phone bill yesterday on a more than two-hour phone call with Chinese President Xi Jinping, their fifth chat while Biden has been in office. According to Chinese state media, Xi warned Biden not to "play with fire" when it comes to House Speaker Nancy Pelosi's possible trip to Taiwan. China considers Taiwan as its official territory and not an independent state, and a visit by Pelosi, who would be the highest-ranking US official to travel to Taiwan in 25+ years, would be considered a severe provocation against Beijing.

New political party just dropped. The Forward Party, a new political party aimed at providing a middle ground for voters fed up with Democrats and Republicans, was announced yesterday by party co-chairs Andrew Yang and Christine Todd Whitman, alongside former Republican Rep. David Jolly. Yang, a former Democratic candidate for president, and Whitman, the former Republican Governor of New Jersey, hope to win over the millions of voters who now identify as Independent. The Forward Party doesn't have any stated policy goals yet.

JetBlue moves a lot faster than its wi-fi. Just hours after Spirit rejected a merger with Frontier, JetBlue swooped in with an agreement to buy Spirit for $3.8 billion. The tie-up would create the fifth-largest airline in the country, and perhaps put the combined company in a position to challenge the four dominant carriers: American, Delta, United, and Southwest. It's not a done deal yet: Expect a heated antitrust battle.

GOVERNMENT

The sprint to save Biden's agenda

Joe Manchin in a suit pointing. Tom Williams/Getty Images

Democratic Senator Joe Manchin started the congressional kitchen timer Wednesday when he and Senate Majority Leader Chuck Schumer announced they had agreed on a climate and tax bill worth $700+ billion. Now, Democrats are scrambling to pass this signature legislation just nine days before lawmakers go on August recess.

Here are some highlights from the package:

  • ~$370 billion for clean energy industries over the next 10 years, with $30 billion in incentives for American companies to build clean energy solutions.
  • An extension—and expansion—of the federal tax credit for EVs.
  • Medicare would finally be able to negotiate lower prescription drug prices.
  • A number of tax provisions intended to help the government pay for all the spending, including a 15% corporate minimum tax on companies with a market cap of $1 billion or more and, in a major hit to hedge funds and private equity shops, the closing of the carried-interest loophole that allows some investment firms to pay a lower tax rate on their earnings.

What's next? Democrats only need 50 senators' votes (and there are 50 Dems) to pass this reconciliation bill, but that may be tougher than it sounds. Arizona Senator Kyrsten Sinema, a key vote, still hasn't signaled her support. And Covid is making its way through Capitol Hill like a lobbyist with a sandwich tray. Dem. Sen. Dick Durban just tested positive, and Dems haven't had all 50 members voting since the beginning of July, per Politico.—MM

        

WEALTH

When flying private goes public

A photo illustration of a private jet with celebrities looking out the window Illustration: Francis Scialabba, Photos: Getty Images

For the last few weeks, ultrawealthy public figures like Kylie Jenner, Drake, and Elon Musk have found themselves at the center of a climate controversy.

Twitter accounts that automatically track and upload private flight data, like @CelebJets, have revealed how frequently the private jets of the 0.0001% take flights that are honestly more like hops—some lasting as briefly as 10 minutes. Even flights that last shorter than the line for coffee at JFK release about a ton of carbon emissions into the atmosphere (a quarter of what an average person emits each year, globally).

Drake, the owner of the $185 million jet "Air Drake," explained that some of his aircraft's shorter trips were a matter of logistics—passengerless flights to move the jet to a cheaper parking spot, basically.

The rise in popularity of private jet trackers has brought attention to the highest earners' oversized climate impact. Bloomberg analysis published in March found that the world's wealthiest emit 70x more carbon dioxide than the bottom 50% combined.

Zoom out: It's not just celebrities choosing private, either. Private jet companies are reporting a recent surge in demand, as high earners fork out cash to avoid havoc at airports. Jetty, the private flight charter app, reported 34,000 flight requests in July, about 9,000 more than the monthly average.—MK

        

GRAB BAG

Key performance indicators

Beyonce's new album artwork Parkwood Entertainment and Columbia Records

Stat: Who could've predicted that the music battle of 2022 would be Beyoncé vs. Kate Bush? As Beyoncé drops her first studio album in six years today, she faces a climate where audiences are increasingly preferring older music to newer tracks released by even the most hyped artists. Consumption of "catalog music," or music that's at least 18 months old, surged by 14% in the first half of 2022 compared to a year earlier, according to Luminate. And the baseline was already high—old music represented 70% of the US music market, as of January.

Quote: "Nobody has gotten to the bottom of 9/11, unfortunately."

In an interview with ESPN, former President Trump responded to criticism from 9/11 survivors and victims' family members for hosting a LIV Golf event at his Bedminster, NJ, course this weekend. LIV Golf is backed by the Saudi Arabian government, and 15 of the 19 attackers on 9/11 were Saudi nationals.

Read: Using Forer statements as updates and affirmations. (Astral Codex Ten)

QUIZ

Save your quiz for another day

Weekly news quiz

The feeling of getting a 5/5 on the Brew's Weekly News Quiz has been compared to a really cool person you met once five years ago remembering your name.

It's that satisfying. Ace the quiz.

BREW'S BETS

Friday night is for boogying: For playlist inspo, Rolling Stone ranked the top 200 dance tracks of all time. Can't believe "Clair de lune" got snubbed.

That's enough, science: Researchers have turned dead spiders into robotic gripping claws. Read more here.

Oddly useful: A beginner's guide to standing up on a paddleboard, one of summer's great delights.

50% off 3 months of fitness coaching: Future connects you with an expert fitness coach who gives personalized daily coaching + a custom workout plan—all through the Future app. Brew readers get 50% off their first 3 months.*

Invest in knee, two, one…Monogram's reinventing a $19.6b industry with joint-replacing robots and 3D-printed implants that improve patient results. Now they're aiming for a public listing—and *you* can help them get there. Invest here.*

*This is sponsored advertising content.

WHAT ELSE IS BREWING

  • Apple's Q2 report in a nutshell: Growth is slowing in a "challenging operating environment," but sales and profit came in better than expected.
  • Instagram is walking back the introduction of some TikTok-like features after getting pelted with criticism this week.
  • Jack Ma plans to cede control of Ant Group, the Alibaba affiliate that's been under intense regulatory scrutiny from Beijing over the past several years.
  • West Virginia will stop doing business with five financial institutions that have stopped supporting the coal industry.
  • A Gorgosaurus skeleton sold for $6.1 million at auction. It was the first one available for private ownership.

GAMES

Friday puzzle

Here's a puzzle from the Will Shortz archives:

Words starting with a "kw-" sound usually start with the letters "qu-," as in "question," or "kw-," as in "Kwanzaa." What common, uncapitalized English word starting with a "kw-" sound contains none of the letters Q, U, K, or W?

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For more from the Brew:

Celebrity chef Bobby Flay is obsessed with his cat. On the latest Business Casual, Bobby talks about his new cat food venture and offers tips for aspiring chefs and restaurateurs. Listen or watch here.

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ANSWER

Choir

         

Written by Neal Freyman, Matty Merritt, Max Knoblauch, and Joseph Abrams

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