Corporate Profits Reached Record High in 2011

WSJ -- "Big U.S. companies have emerged from the deepest recession since World War II more productive, more profitable, flush with cash and less burdened by debt. An analysis by The Wall Street Journal of corporate financial reports finds that cumulative sales, profits and employment last year among members of the Standard & Poor's 500-stock index exceeded the totals of 2007, before the recession and financial crisis.

Deep cost cutting during the downturn and caution during the recovery put the companies on firmer financial footing, helping them to outperform the rest of the economy and gather a greater share of the nation's income. The rebound is reflected in the stock market, with the Dow Jones Industrial Average at a four-year high. "U.S. companies became leaner, meaner and hungrier," said Sung Won Sohn, a former chief economist at Wells Fargo WFC."

MP: The chart above shows after-tax corporate profits for U.S. corporations as a whole, which set a new record high in 2011 of more than $1.5 trillion, and were 20.5% above the pre-recession peak of $1.26 trillion in 2006 (adjusted for inflation).  While the weakness in the labor market continues to receive media attention, we shouldn't lose sight of the fact that U.S. corporations have never been more profitable.  

Measured by real GDP, output is just now barely above pre-recession levels, and measured by employment, the economy is still five million jobs below December 2007.  Measured by corporate profits, the economy has made a strong and complete recovery and is now above pre-recession levels by more than 20%.