Corporate Profits Rise as 700,000 Jobs Are Threatened

If you're wondering why Republicans remain stubborn in the face of the sequester's threat to the U.S. economy, this story in the NYTimes today might help explain it. While 700,000 people are projected to lose their jobs, the stock market and corporate profits appear to be healthy and growing. Here's part of the Times' story that is meaningful:

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.” Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation. 

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays. 

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation. 

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.