Monday, August 02, 2010

Chart of the Day: Record Corporate Profits in Q1

According to BEA data via the St. Louis Fed, after-tax corporate profits reached an all-time record high of $1.369 trillion in the first quarter of 2010 (see chart above). 


At 8/02/2010 1:48 PM, Blogger Dr William J McKibbin said...

Looks like the heavy layoffs of unnecessary workers is paying off for corporations -- clearly, the future of enterprise does not include massive labor inputs -- that's good news for capitalism, but bad news for the unemployed. I regret that many of the unemployed in America today will never work again...

At 8/02/2010 1:57 PM, Blogger Ed Dolan said...

The interesting question to me is why all these profits are accumulating in record corporate cash holdings? One interpretation is that all the cash reflects uncertainty. If corporations were sure future investment would be profitable, they'd be investing; if they were sure it would not be, they would be paying out dividends. Uncertainty is also a plausible explanation of slow hiring.

At 8/02/2010 2:47 PM, Blogger morganovich said...

these are predominantly cost cutting profits. revenues have not recovered nearly as rapidly.


another explanation is low capacity utilization.

the number is still around 74%, which is usually what you see at the bottom end of the cycle.

low utilization means low incentive to invest. why add capacity when you are not even using the capacity you have?

another potential explanation for the persistence of unemployment is the real estate bust. being underwater on a mortgage prevent you from moving to where the jobs are. not sure to what extent this has been an issue so far, but it will be one when hiring begins again in earnest and implies that we could see persistent pockets of high unemployment at the same time we see pockets where it's difficult to hire (like europe). take away labor mobility, and adjustment becomes much more difficult.

At 8/26/2010 5:33 PM, Blogger z_zapper said...

I know there are many factors determining corporate profits, but shouldn't they roughly trend with GDP? How is it that profits have more than doubled since 2000, while we haven't had nearly that much growth in the economy? What does this mean?


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