Company profits rise as joblessness persists

Shipping containers in the Port of Miami. Stronger shopper spending and better overseas sales of US goods helped the economy expand in the most recent quarter. Shipping containers in the Port of Miami. Stronger shopper spending and better overseas sales of US goods helped the economy expand in the most recent quarter. (Wilfredo Lee/ Associated Press/ File 2010)
By Catherine Rampell
New York Times / November 24, 2010

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

NEW YORK — The nation’s workers may be struggling, but US companies just had their best quarter ever.

Businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released yesterday.

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

The government does not adjust the numbers for inflation, in part because these corporate profits can be affected by global pricing changes and because the government does not have a price index for individual companies.

The next-highest annual corporate profits level on record was in the third quarter of 2006, when they were $1.655 trillion.

Corporate profits have been doing extremely well for a while.

Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history.

As a share of gross domestic product, corporate profits also have been increasing and now represent 11.2 percent of total output. That is the highest share since the fourth quarter of 2006, when they accounted for 11.7 percent of output.

This breakneck pace can be partly attributed to strong productivity growth — which means companies have been able to make more with less — as well as some of the profits of US companies coming from abroad. US economic conditions may still be sluggish, but many emerging markets like India and China are expanding rapidly.

Yesterday’s Commerce Department report also showed that the nation’s output grew at a slightly faster pace than originally estimated last quarter.

The growth rate, of 2.5 percent a year in inflation-adjusted terms, is higher than the initial estimate of 2 percent.

The economy grew at 1.7 percent annual rate in the second quarter.

Still, most economists say the current growth rate is far too slow to recover the considerable ground that was lost during the recession.

“The economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation,’’ Paul Dales, a US economist for Capital Economics, wrote in a note to clients. “This is unlikely to change in 2011 or 2012.’’

The increase in output in the third quarter was driven primarily by stronger consumer spending.

Wages and salaries also rose in the third quarter, which might help bolster holiday spending in the final months of 2010.

Private inventory investment, nonresidential fixed investment, exports, and the federal government also contributed to higher output.

These sources of growth were partly offset by a rise in imports, which are subtracted from the total output numbers the government calculates, and a decline in housing and other residential fixed investments.