Corporate Profits at Highest Ever

**Charles Stover** · 24th November 2010 10:29 AM

source

American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or noninflation-adjusted terms.

Yet unemployment is high. I guess we didn't give them enough tax cuts for them to hire people. The fact that they're making more than they've ever made... that's just obviously not enough for them to hire new employees. Did I mention tax cuts? I think they could use some. Corporations are struggling so hard to get by these days.

Does this remind anyone else of the economic situation in England after the Industrial Revolution? Minimum wage was the cure then, but it's hard to say what is necessary here. On the surface, it looks like people need an employee quota per income level, but even I can admit that doesn't sound very sane. But then again, I assume that's how people felt about minimum wage when it was first implemented.

Thoughts?

How are profits so high, yet unemployment so low, yet tax cuts still being demanded for the only area of the economy that is thriving?

**Macduff** · 24th November 2010 10:32 AM

noninflation-adjusted terms.

Those words should be highlighted. What's the figure when adjusted for inflation?

**Charles Stover** · 24th November 2010 10:53 AM

Firstly, there is no standard of measurement for inflation. Secondly, that depends on from when you're calculating. Inflation since when? The start of America? The start of profit measurement? Just before the recession? The last highest profit year of 2006? Last year?

Value of 2006 dollar compared to current dollar:
$1.06 using the Consumer Price Index
$1.06 using the GDP deflator
$1.01 using the value of consumer bundle
$1.08 using the unskilled wage
$1.07 using the Production Worker Compensation
$1.03 using the nominal GDP per capita
$1.06 using the relative share of GDP
Average: $1.05

Don't act like we're discussing a 50% inflation rate. Profits are sky high, by far more than enough to hire new employees. Tax cuts are an absurd notion with no backing.

**Macduff** · 24th November 2010 10:57 AM

Originally Posted by Charles Stover

Firstly, there is no standard of measurement for inflation. Secondly, that depends on from when you're calculating. Inflation since when? The start of America? The start of profit measurement? Just before the recession? The last highest profit year of 2006? Last year?

Value of 2006 dollar compared to current dollar:
$1.06 using the Consumer Price Index
$1.06 using the GDP deflator
$1.01 using the value of consumer bundle
$1.08 using the unskilled wage
$1.07 using the Production Worker Compensation
$1.03 using the nominal GDP per capita
$1.06 using the relative share of GDP
Average: $1.05

Don't act like we're discussing a 50% inflation rate. Profits are sky high, by far more than enough to hire new employees. Tax cuts are an absurd notion with no backing.

That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or noninflation-adjusted terms.

If we're talking about a financial figure over a 60 year period then adjusting for inflation is pretty significant. Try going grocery shopping on a 1950 budget and see how much you come home with.
Not adjusting for inflation or population growth is a way to be deceptive with statistics.

**Macduff** · 24th November 2010 11:18 AM

First off, this isn't a record year. And by "sky high", we're talking a difference of a couple of points. And the reason companies aren't hiring is because they don't know what the future effects of the deficit being piled on by this administration and the new health care plan are going to be.

**Charles Stover** · 24th November 2010 11:27 AM

What bull. Unemployment goes up as profits go up. I wonder why that is. I'm sure the unemployment jump that happened under Bush was also the fault of the deficit and health care plan of this administration, too.

"A couple of points" is a whole 2% (and 4% higher than two years ago) and still higher than the history of the country's profit records. Yet they don't have enough to hire employees. Uh huh.

**Macduff** · 24th November 2010 11:43 AM

Originally Posted by Charles Stover

What bull. Unemployment goes up as profits go up. I wonder why that is. I'm sure the unemployment jump that happened under Bush was also the fault of the deficit and health care plan of this administration, too.

"A couple of points" is a whole 2% (and 4% higher than two years ago) and still higher than the history of the country's profit records. Yet they don't have enough to hire employees. Uh huh.

I don't know if you noticed but George Bush isn't president anymore. Hasn't been for couple of years. So guess who gets to take responsibility. And I'm certain that if things were going great, you guys on the left wouldn't be rushing to give George Bush credit.

Corporate Profits Not Actually At Record High
I saw a lot of commentary yesterday about how corporate profits are now at a record high. I think it’s worth noting that this is true if and only if you don’t adjust for inflation. And I have no idea why you would think adjusting for inflation is a bad idea in this context. A helpful chart the Commerce Department emailed out yesterday illustrates what’s actually happening:

The major takeaways from this chart are twofold. One, corporate profits aren’t really at a record high. Two, corporate profits hit new highs all the time in an expanding economy. The real story here isn’t that nominal profits are at a record high, it’s that real profits are still below-peak. Which is just to say that corporate profits, like most everything else, reflect incomplete recovery from the recession. The good news here is that the trends are in the right direction. Profits are rising. Capital expenditures are rising.

Yglesias

Corporate profits hit a new record in the U.S. in the third quarter of this year. At least, that was the headline after the data were released Tuesday. It was kind of a meaningless distinction: In a growing economy, even a fitfully growing one, corporate profits should hit new records on a pretty regular basis. Personal income hit a new record in the third quarter, too. Indications are that inflation-adjusted corporate profits are probably still slightly below the levels of before the Great Recession (the Bureau of Economic Analysis doesn't adjust the main corporate profit number for inflation, because — given all the profits that flow in from overseas — it doesn't know what inflation rate to use).

The Real Story Behind Those "Record" Corporate Profits - Justin Fox - Harvard Business Review

**Charles Stover** · 24th November 2010 09:59 PM

Originally Posted by Macduff

I don't know if you noticed but George Bush isn't president anymore. Hasn't been for couple of years. So guess who gets to take responsibility. And I'm certain that if things were going great, you guys on the left wouldn't be rushing to give George Bush credit.

So Obama is to blame for what happened before he took office? I didn't say he had nothing to do with the current unemployment; but I am saying that that is a logical deduction to make given that the unemployment crisis has been occurring since before Obama took office. Obviously your blame for Obama is unfounded, since he cannot possibly be responsible for something that started/happened before he was even elected.

The Real Story Behind Those "Record" Corporate Profits - Justin Fox - Harvard Business Review

Did you read the article, or did you just Google the first thing that agreed with you in the headline?

Well, according to the BEA's data, financial industry profits and "rest of world" profits — that is, the money U.S.-based corporations make overseas — are relatively much higher now than they were in the 1950s or 1960s. And the taxes paid by corporations are much lower now than they were then, as a share of national income.

So the reason that corporate profits are near their all-time highs would appear to be that financial corporations (mainly big financial corporations) and multinationals are making lots of money and paying less of it out in taxes.

Obviously, they need more tax cuts so that they can hire people without spending the record high profits they're already making.

**Seraphima** · 24th November 2010 10:05 PM

Why would any business waste money on hiring people when they've learned how far they can push their current employees to get the same amount of work (or more) done?

Don't agree with it but can't say I'm surprised unemployment isn't decreasing with increased profits. My own company is doing exactly this and is having record profits with less staff.

**frodly** · 25th November 2010 04:32 AM

Originally Posted by Macduff

I don't know if you noticed but George Bush isn't president anymore. Hasn't been for couple of years. So guess who gets to take responsibility. And I'm certain that if things were going great, you guys on the left wouldn't be rushing to give George Bush credit.

Yglesias

The Real Story Behind Those "Record" Corporate Profits - Justin Fox - Harvard Business Review

Inflation over the last few years is almost non-existent. In fact inflation was at historical lows over the last few years.

Current Inflation Rates | Monthly and Yearly Chart, Graph and Table: 2000-2010 Data - US Inflation Calculator

Which means inflation is an almost non-existent factor in this discussion. It is simply another attempt by the right to lie and distort in order to propagate the rouse that Obama is somehow anti-business. It is an unadulterated lie, Obama's presidency has been very good for big business, it has just been bad for all the rest of us(just like Bush's presidency).