Tuesday, June 12, 2012

Manufacturing Profits Are 34% Above 2007 Levels

U.S. manufacturers had another solid quarter of profits in the first quarter of 2012, according to data released this week by the Census Bureau.  The after-tax profits for American manufacturing corporations totaled more than $148 billion from January to March, an increase of $2.8 billion from profits of $145.2 billion in the fourth quarter of 2011, and  $2.6 billion more than the profits of $145.4 billion in the first quarter of 2011.  

Manufacturing profits have ranged between $145 billion and $156 billion over the last five quarters starting at the beginning of 2011, which contributed to record-setting profits in 2011 on an annual basis of almost $600 billion.  In 2007 before the recession started, manufacturing profits were averaging $110.6 billion per quarter, so the recent averages of $148 billion per quarter since 2011 put current manufacturing profits about 34% above pre-recession levels, and provide evidence of an industry that has made a complete recovery from the effects of the Great Recession. 

24 Comments:

At 6/12/2012 10:46 PM, Blogger Unknown said...

Speaking of manufacturing, here's an interesting "crisis of riches."

Rail-car shortage hampers shipments of cars, trucks from assembly plants
^
"North American automakers are struggling with a shortage of rail cars used to transport cars and light trucks from assembly plants to dealerships.

As of May 18 , daily inventories of vehicles awaiting shipment totaled 81,470 units -- well above the standard daily inventory of 69,000 vehicles, according to a report from TTX Co., a Chicago firm that coordinates rail shipments of vehicles for the railroad industry."

 
At 6/12/2012 11:27 PM, Blogger Jon said...

Hooray. The rich are doing well. Fortunately the 95% who don't make money from corporate profits are irrelevant so their suffering doesn't matter.

 
At 6/13/2012 2:29 AM, Blogger PeakTrader said...

Someone wrote: "Technology increases productivity. And when productivity grows, manufactured goods become less expensive and the market for them expands. That creates a demand for more workers, and that extra demand usually outweighs the labor-saving impact of mechanization."

However, prices tend to be "sticky," many U.S. manufactured goods have market power, and U.S. manufacturing shifted into more high-end goods (and fewer low-end goods). So, the result can be higher profits rather than lower prices.

 
At 6/13/2012 4:23 AM, Blogger Jon said...

http://www.businessinsider.com/dear-america-you-should-be-mad-as-hell-about-this-charts-2012-6?op=1

 
At 6/13/2012 5:58 AM, Blogger Larry G said...

How does this reconcile with the continuing high unemployment rate
and.....

" One reason that the U.S. economy still struggles to achieve sustained growth is that Americans are a long way from recovering the trillions of dollars of household wealth lost during the Great Recession."

http://money.cnn.com/2011/06/09/news/economy/household_wealth/index.htm


"record" manufacturing and "record" unemployment and wealth lost do not seem to go together.

 
At 6/13/2012 6:48 AM, Blogger Henry H said...

Manufacturing only makes up about 10% of the economy.

 
At 6/13/2012 7:11 AM, Blogger Larry G said...

okay.. how about the other 90%?

where is the unemployment concentrated?

is it public sector jobs?

 
At 6/13/2012 7:46 AM, Blogger Larry G said...

you rail against "the king" and you rail against modern elected governance that uses "force" to elicit compliance, and you rail against the tyranny of the majority but what you say is a better way ....

is either run by a majority vote OR by a KING-type governance where individuals make arbitrary decisions apart and separate from a majority vote.

Most folks if given the choice between an elected governance and someone is charge who overrules any/all who might disagree...

they will choose the former - and, in fact, in the modern world, that's exactly what they have done.

You keep insisting that we'd do better with a "one guy in charge" ...."decider"... a "judge" or "surety" and vague ideas about how he comes to be in charge and how he might be removed.

Modern governance is much more clear on how the govt deals with property rights.

we elect majority government which then appoint judges - who can be and are removed and the govt itself can and is removed if people do not like how it operates.

why are you essentially advocating an "appointed King" type governance as "better" than an elected governance?

 
At 6/13/2012 9:43 AM, Blogger morganovich said...

"
where is the unemployment concentrated?

is it public sector jobs?"

nope.

those are up big since 2008 (at least at the federal level)

http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesting/7190-private-jobs-down-46-million-from-january-2008-federal-jobs-up-114

states are down, but "all government" has fared much better than "private" over the last 4 years.

of interest, this is not the result of declines in "state spending" as some have argued.

state spending has been up every year since 2000.

http://news.investors.com/article/614516/201206120801/state-and-local-governments-growing.htm

fiscal 2011 was 14% higher than 2008.

 
At 6/13/2012 9:44 AM, Blogger morganovich said...

"Modern governance is much more clear on how the govt deals with property rights."

what? compared to what? you think property rights are better than they were in the 1920's?

not a chance.

on what do you base this outlandish claim larry?

 
At 6/13/2012 9:46 AM, Blogger Jet Beagle said...

Larry G: ""record" manufacturing and "record" unemployment and wealth lost do not seem to go together."

Larry,

As Jon Murphy and I pointed out in a recent post, the goal of profit-seeking corporations is to maximize profits - not to maximize employment.

Also, recent reports have shown that household wealth lost since 2007 is almost totally in real estate.

Third, as someone just pointed out, manufacturing is only one part of the U.S. economy. Some sectors, such as construction and real estate, are still suffering.

Finally, let's not forget that foreign corporations own all or part of many companies which are included in the U.S. Censu Bureau data. Fiat, for example, owns 58% of Chrysler. Honda owns 100% of American Honda Company. Alberto-Culver is now a wholly-owned subsidiary of Unilever. So not all the profits from American manufacturers will flow to American households.

 
At 6/13/2012 9:50 AM, Blogger Jet Beagle said...

Larry G: "what you say is a better way ....

is either run by a majority vote OR by a KING-type governance where individuals make arbitrary decisions apart and separate from a majority vote."


What are you talking about, Larry? Are you referring to CEO's of corporations who are chosen by the owners of those corporations to run their businesses?

 
At 6/13/2012 10:12 AM, Blogger morganovich said...

bart-

question:

how are you calculating your CPI?

we have played around with reweighing healthcare to reflect % of gdp and remixing OER to reflect the true weighting of renters vs owners and taking out the "quality adjustments" that are so arbitrary (and counter to good monetary policy) and gotten numbers that look roughly 2.5-3% higher than reported CPI.

i'd be very interested to see how you were looking at it.

 
At 6/13/2012 10:28 AM, Blogger bart said...

how are you calculating your CPI?

we have played around with reweighing healthcare to reflect % of gdp and remixing OER to reflect the true weighting of renters vs owners and taking out the "quality adjustments" that are so arbitrary (and counter to good monetary policy) and gotten numbers that look roughly 2.5-3% higher than reported CPI.



That's close, although I make additions - one being that I adjust for all of medical instead of just for insurance.

I also have two series, one going back to 1982 and one going back to 1968.

I also do a 'remix' (love that word usage :-) of OER is what sounds like a similar fashion, and also attempt to take into account moving frequency. In other words, when housing prices were going up fast, I only use a portion of it since folk only move about every 5-7 years.

Then I add in adjustments for substitution, hedonics, reverse hedonics, geometric averaging etc., and they're larger than the BLS estimates.

The current (as yet unpublished) adjustment is in the range you mentioned, plus a percent or so. Since 2000, it has varied between negative and well over 7%.

 
At 6/13/2012 10:32 AM, Blogger bart said...

By the way, my published work is still very roughly based on Shadowstats work but with adjustments - and is running 1-3% higher than my as yet unpublished work.

 
At 6/13/2012 12:02 PM, Blogger morganovich said...

bart-

i know john over at SS. my numbers have tended to come out a bit lower than his, but not a ton.

i got fascinated by this when he showed me that the pre and post boskin cpi trends actually had different slopes during the 90's.

measuring inflation is very difficult at the best of times and with the best of intentions, but i fear we are a long way from either of those 2 conditions pertaining to cpi.

 
At 6/13/2012 12:23 PM, Blogger Ron H. said...

"Hooray. The rich are doing well. Fortunately the 95% who don't make money from corporate profits are irrelevant so their suffering doesn't matter."

Suffering? Do you hyperbole much?

 
At 6/13/2012 12:49 PM, Blogger bart said...

my numbers have tended to come out a bit lower than his, but not a ton.

You must be comparing to his pre Clinton rather than his full (back to 1982) corrections?

His 1982 based data set correction (SGS CPI) is right at 10% currently, and adding 3% to the most current CPI-U is 2.3%, which would make your total about 5.3% - almost 5% lower than his.

For what its worth, my most recent CPI w/o lies is 6.9%, down from 8.9% last September.

Additionally, I show very different slopes pre & post Boskin - and a truly whopper set of slope differences in the early 70s mostly due to Medicare.

Amen on it being difficult measuring inflation, one of the primary reasons I seldom go off on anyone unless they totally disregard the actual and real flaws in CPI-U, the main and simple and completely-observable-in-the-real-world issue being how seniors living on SS lose purchasing power virtually every year.

 
At 6/13/2012 1:43 PM, Blogger morganovich said...

"the main and simple and completely-observable-in-the-real-world issue being how seniors living on SS lose purchasing power virtually every year."

well that was the whole point of boskin, no? to reduce social security and medicare COLA's?

cutting SS and medi directly was politically untenable, so they went at it a different way.

the problem is that they affected myriad other things as well.

it was like killing a rodent with a flame thrower and ushered in perpetual asset bubbles as the "new normal".

 
At 6/13/2012 1:53 PM, Blogger Larry G said...

some have asserted that social security payments are part of what kept the economy from total collapse....and maintained some baseline level of aggregate demand.

no?

 
At 6/13/2012 2:15 PM, Blogger morganovich said...

anyone who asserted that was wrong.

they are transfer payments.

each of those dollars came from someone else.

they did not just appear.

that's just baseless keynsian notions that if you take from me and give to you, it somehow creates growth.

there is literally no empirical evidence to support this. it's pure cargo cult thinking

further, any such effect would be swamped by ZIRP which crushes the buying power of retirees.

many had planned to live on interest payments from savings.

but, if you drop money market rates from 3-4% to 0.1%, well that's a monstrous drop in income.

 
At 6/13/2012 3:08 PM, Blogger bart said...

well that was the whole point of boskin, no? to reduce social security and medicare COLA's?

Bingo, give that man a kewpie doll.

And the "fiddling" has grown since Boskin per my work.

 
At 6/13/2012 3:10 PM, Blogger bart said...

Personal income less transfer payments:


http://www.nowandfutures.com/images/pers_income_less_transfer.png


http://www.nowandfutures.com/images/savings_as_percent_pers_income.png

 
At 6/13/2012 4:33 PM, Blogger Jet Beagle said...

morganovich: "well that was the whole point of boskin, no? to reduce social security and medicare COLA's?"

Not sure what you mean. Are you suggesting that elected officials tasked the Boskin Commission with inventing a reason to reduce COLA's? Isn't it more likely that both economists and elected officials actually believed CPI was overstating inflation?

If a conspiracy to screw retirees actually occurred, do you think it would not have been revealed by now? Have you read anything to indicate such a conspiracy happened?

 

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