Corporate Profits at All Time High, Wages Not So Much….


Just four years after the worst shock to the economy since the Great Depression, U.S. corporate profits are stronger than ever.   In the third quarter, corporate earnings were $1.75 trillion, up 18.6% from a year ago, according to last week’s gross domestic product report. That took after-tax profits to their greatest percentage of GDP in history.   But the record profits come at the same time that workers’ wages have fallen to their lowest-ever share of GDP.   “That’s how it works,” said Robert Brusca, economist with FAO Research in New York, who said there is a natural tension between profits and the cost of labor. “If one gets bigger, the other gets smaller.”   Profits accounted for 11.1% of the U.S. economy last quarter, compared with an average of 8% during the previous economic expansion. They fell as low as 4.6% of GDP during the recession.   “Corporate profits took a big hit in the recession like everything else, but they’ve seen a massive bounce back,” said Heidi Shierholz, an economist with the Economic Policy Institute, a liberal think tank. “Wages are determined by what’s going on in the labor market and we haven’t seen a big bounce back there.”   A separate government reading shows that total wages have now fallen to a record low of 43.5% of GDP. Until 1975, wages almost always accounted for at least half of GDP, and had been as high as 49% as recently as early 2001.

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