While economists and market watchers have often looked to the US’ largest private employer — Walmart — for clues about the health of the US economy, the reality is that the pulse of the economy can now be found in an online retailer that has no physical stores: Amazon.
And guess what? Things are going well.
Amazon is at a new all-time high. After reporting an unexpected profit on Thursday night, the stock was trading near $US600 on Friday morning.
This a marked contrast with Walmart.
Earlier this month, Walmart CEO Doug McMillon gave a sort of downbeat assessment of the US economy in an interview on CNBC, saying the economy is “steady” and “OK.”
Not exactly a ringing endorsement.
During the financial crisis and in the years that followed, Walmart — which offers a wide variety of products usually at or near the lowest-available price point — was seen as a bellwether for the economy and in particular consumer spending, which is responsible for about two-thirds of GDP.
And so it has become a habit to hear economic assessments from Walmart executives and take them as indicative of the “state of the consumer.” But now, the place to find the US consumer is Amazon. And in particular, the places where Amazon finds its customers: the front door.
A Wall Street Journal report on Wednesday detailed how landlords in apartment buildings across the US dealing with an influx of packages from online deliveries. This deluge is hurting productivity while creating chaos for building managers and tenants.
Earlier this month we noted that at least one college mailroom at the University of Connecticut was being overwhelmed by an influx of deliveries, and the Chronicle of Higher Education followed with a wider-ranging report on how mailrooms across the country are dealing with this problem.
Amazon Prime, which is available to college students for six months free and $US49 a year after that, provides free two-day shipping on almost every product offered by the retailer. And so you could be buying books for class or a new t-shirt or toothpaste or toilet paper and get it sent to your dorm (or mailroom, or lobby, or front door, etc.) in two days, for free.
As a result, guess where you don’t have to go? Walmart!
Perhaps, however, the most ironic part of McMillon’s seemingly downbeat look at the US economy is that he was speaking with CNBC after the company announced its profits would fall over the next couple years as it ramps up investment on its employees.
And while this is bad news for Walmart, it is unequivocally good news for the economy.
Again, Walmart employs 2.1 million people and is the largest private employer in the world. If the company is paying its employees more, then you’re going to have more people with greater purchasing power. Again, a major positive for the economy.
On Thursday, Amazon reported revenue of $US25.4 billion with product sales — or sales of actual stuff — coming in at $US18.5 billion, up from $US16 billion a year ago.
In the holiday quarter, Amazon expects sales to 14%-25% over the prior year.
Next year, Walmart expects sales to be flat.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.