Economically this past year and a half, have been nothing less than historic. The political leaders in the country have micro-managed the economy, in ways that I never thought I'd see.
Ordering people to self-quarantine, closing businesses permanently, under the rubric of “non-essential” and limiting commercial customers under the guise of “social distancing.”
These strategies collectively caused a downward spiral in the economy, which we have not yet fully recovered from. That dreadful second quarter of 2020 saw the largest decline in the economy for generations.
Unfortunately, the part of the economy most affected was the small and medium-sized businesses and independent entrepreneurs who don't have stock that trades on an exchange.
They simply went away. A tragedy at the individual level, but still today unnoticed by the national government.
It is this loss of small businesses, that is beginning to show up in our national economic numbers. And it's creating some real anomalies.
Just a few minutes ago we had the third and final estimate of the Nation's Third Quarter GDP, the sum total of all goods and services produced in the country, along with the latest Corporate Profits estimate.
Today we saw a slight revision higher in the current overall reading on GDP. Revised up a 2.3% growth from an estimated 2/1% growth earlier.
But it's in corporate profits that we saw the largest revision. Corporate profits were revised down, yet again, from 4.2% profits to just 3.4%. That's a decline from the initial estimate of nearly 21%. Substantial by any measure.
And I think the explanation for all this is simply how profits are counted. Remember that each quarter earnings season begins with the big four banks reporting their profits.
Followed shortly thereafter by the big 5. Those major high-tech companies that dominate the stock market: Apple Computer, Amazon, Alphabet/ Google, Microsoft, and Facebook.
Stop right there.
At that point, we have a good picture of just what the mega-companies in the nation are doing. Add another couple of weeks, and large company reports. And we can pretty well estimate how large corporations are performing.
And that's just in the first month, after quarter-end.
What takes time to estimate are the small, mom-and-pop enterprises. They don't have the resources of those large fortune 100 companies. Financial reports are usually handled by a staff who is busy doing other things.
So it's small businesses that report late. And consistently, are dragging down profit levels. Clearly, they are struggling under the weight of these new corporate regulations and restrictions. And the numbers reflect this.
So today, when you look at the overall corporate profits and wonder why they seem always to be revised lower. When the big 5 and the rest of the Fortune 100 are doing so well.
Just remember those small business people, they are, after all, who are feeling the full brunt of these Covid Restrictions.
And whose Profits may not meet expectations.