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  • #1

    US corporations flush with profits

    In 2005, on a before-tax basis, US corporate profits were the highest as a percentage of the economy since 1968. On an after-tax basis, the only year since 1967 with higher profits than 2005 was 1997. I put together a chart that shows these calculations, which I attach.

    Why should we care about corporate profitability? Among other things it demonstrates that our companies by and large are very healthy. This is good news for ordinary workers because it indicates that hefty raises and hiring are around the corner.

    For investors, it means that these profits are about as good as it gets and profit growth probably will only match growth in the economy. It probably wouldn't be a good time to put your life savings in the stock market, for instance.
    Attached Files
    Last edited by DanS; March 31, 2006, 12:28.
    I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891
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  • #2
    Beautiful!

    Comment

    • #3
      And where are those profits going? Much of them flow into the hands of the CEOs and other upper management types. Meanwhile, layoffs here, there and everywhere.

      But yes, companies appear to be (given Enron and other such disasters, a caveat seems appropriate) financially healthy, and that's better than being unhealthy.

      -Arrian
      grog want tank...Grog Want Tank... GROG WANT TANK!

      The trick isn't to break some eggs to make an omelette, it's convincing the eggs to break themselves in order to aspire to omelettehood.

      Comment

      • #4
        The profits are going to the owners, which means anybody with a 401(k), pension plan, or stocks.

        Also, a chunk goes to Uncle Sam for general purposes.
        I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

        Comment

        • #5
          Around the corner

          Hirings and pay raises are not around the corner. They are already happening. I have hired two people in the last few months at 20% pay hikes over their previous jobs. http://app.rezkeeper.com/RezLogic/us...F5&Color=white is just a subset of all the positions the company I work for is trying to fill.
          “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

          ― C.S. Lewis, The Abolition of Man​

          Comment

          • #6
            In my practice group, we have multiple jobs available and are chronically overworked. The pay is good (overtime paid). The DC area only has 3% unemployment, however, so not many resumes cross our desks.
            I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

            Comment

            • #7
              That too, of course. Hey, I'm all for economic recovery. I was simply responding to your "this is good news for ordinary workers..." comment. Yes, it may well mean better raises and more hiring. I certainly hope so.

              I will find out what my raise is in a few days. I know performance review is good, so let's see that cash flow!

              -Arrian
              grog want tank...Grog Want Tank... GROG WANT TANK!

              The trick isn't to break some eggs to make an omelette, it's convincing the eggs to break themselves in order to aspire to omelettehood.

              Comment

              • #8
                Hey, I'm all for economic recovery.
                You are emanating ambivalence.
                I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                Comment

                • #9
                  Que?

                  You struck a cord with the "this is good for the little guy, too" comment is all.

                  Personally, this is good for me. I'm already employed. I have a 401k and it's doing well. I have an IRA.

                  Nevermind.

                  -Arrian
                  grog want tank...Grog Want Tank... GROG WANT TANK!

                  The trick isn't to break some eggs to make an omelette, it's convincing the eggs to break themselves in order to aspire to omelettehood.

                  Comment

                  • #10
                    US corporations flush with profits
                    Tell that to GM.

                    This is good news for ordinary workers because it indicates that hefty raises and hiring are around the corner.
                    Haven't you been saying that for 3-4 years now?
                    Try http://wordforge.net/index.php for discussion and debate.

                    Comment

                    • #11
                      Exception to the rule, apparently.

                      -Arrian
                      grog want tank...Grog Want Tank... GROG WANT TANK!

                      The trick isn't to break some eggs to make an omelette, it's convincing the eggs to break themselves in order to aspire to omelettehood.

                      Comment

                      • #12
                        Is there no room for exceptions in your universe?
                        “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                        ― C.S. Lewis, The Abolition of Man​

                        Comment

                        • #13
                          Here's the WSJ's take, which focuses more on the short-term and quarterly numbers.

                          Corporate Pretax Profits Jump 14.4%
                          Strongest Gain Since 1992
                          Shows Effects of Katrina
                          Weren't as Bad as Feared
                          By MARK WHITEHOUSE
                          March 31, 2006; Page A2

                          Corporate America's share of the nation's income rebounded from the havoc of Hurricane Katrina to a level not seen in four decades, and the hurricane did a bit less damage to the U.S. economy than previously thought.

                          The Commerce Department said yesterday that corporate pretax profits in the fourth quarter of 2005 grew 14.4% from the previous quarter, the strongest rate since 1992. Pretax profits in the third quarter fell 4% as hurricane-related insurance payouts slammed financial results.

                          Corporate profits accounted for 11.6% of gross domestic product in the fourth quarter -- the biggest share of the nation's income companies have taken since 1966. They have been able to do so, say economists, by sharing less with their workers.
                          [A Bigger Take]

                          "It highlights the increased power of corporate America versus labor," says Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. "That is a reflection of the global competition that labor now faces in America."

                          Economists say profit growth is likely to ebb this year as U.S. unemployment falls and workers regain some bargaining power. In the meantime, companies might reinvest some of their gains, giving the economy added momentum.

                          "Corporations are sitting on a mountain of cash, so as long as the economy is growing they will start spending some of that cash," says Nariman Behravesh, chief economist at Global Insight, an economic consultancy in Waltham, Mass.

                          The Commerce Department also reported that real gross domestic product -- the value of the nation's output of goods and services, adjusted for inflation -- grew at a seasonally adjusted, annualized rate of 1.7% in the fourth quarter. The figure was revised up from an earlier estimate of 1.6% but remains the lowest rate recorded since early 2003. For the full year, GDP grew 3.5%.

                          The small, upward revision in fourth-quarter GDP reflects the fact that companies restocked inventories faster than expected in Katrina's wake. Now, many forecasters believe the economy is experiencing a posthurricane boost as strong demand for consumer and business products has elevated business activity, prompting companies to step up hiring.

                          "The first quarter is going to be very firm," says Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, who estimates that GDP in the first quarter, which ends today, grew at a 4.5% annual rate.

                          The consensus estimate of economists polled by WSJ.com1 is that GDP grew at an annual rate of 4.6% in the first quarter, but the growth rate will slow to 3.3% in the second quarter and could be around 2.9% by the end of the year.

                          The factors that crimped growth in the fourth quarter were largely temporary. Katrina and an unusually cold December took a toll on hiring and consumer spending. Defense spending dropped because of the late signing of an appropriations bill, and special short-term auto discounts prompted people to buy cars earlier in the year.

                          Now, the picture for jobs and spending looks a lot better. The Labor Department yesterday reported a drop in the number of people filing for unemployment benefits to 302,000 in the week ended March 25, down 10,000 from the previous week. Companies added an estimated 243,000 jobs in February, bringing the 12-month total to 2.1 million. And despite slow auto sales, total retail sales in February were up 6.7% from February 2005.
                          Attached Files
                          I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                          Comment

                          • #14
                            Originally posted by Oerdin
                            Haven't you been saying that for 3-4 years now?
                            Syas the guy who recently had to choose between 2 jobs.....
                            “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                            ― C.S. Lewis, The Abolition of Man​

                            Comment

                            • #15
                              Why should we care about corporate profitability? Among other things it demonstrates that our companies by and large are very healthy. This is good news for ordinary workers because it indicates that hefty raises and hiring are around the corner.

                              How do you think these record profits came about?? Wages are stagnating; the cost of more and more benefits are being pushed onto the employees, fees (such as college tuition) are climbing, and the standard of living for the average working-joe is dropping.

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