Hey, remember that saying “Businesses hire when they are swamped with demand“?
The evidence just keeping piling up for this idea. It turns out Corporate profits just hit another high – yet wages and employment is in the dumps!
I don’t know what more it will take people to abandon “expectations” as being more important than actual wages and business. As Mr. Paul Davidson says:
“Nothing will build the confidence and trust of business and workers quicker than the continuous ringing of cash registers.”
Here’s the chart from Mr Henry Blodget and FRED showing Corporate profits at modern era high relative to GDP:
Still working on those BHWTSD coffee mugs, stay tuned.
I want one!
btw is this you lot at 0504? http://www.youtube.com/watch?v=f-0_B_N0Rmw&feature=related
Great video!
But, there is no where NEAR enough beer, champagne and water being thrown about for that to be us
ah right ppl were giving call outs what was where…sure theres a comment claiming that one for NY.
This is my fav btw… not to be played if you have speakers at work or in front of the kids, sets an F record lol
Is the record-high corporate profits supposed to show that demand is high and businesses will hire or that profits are disconnected from demand (possibly due to pricing power)?
Supposed to show profits are semi-weakly connected to employment. We’re letting people sit idle instead of working, letting plants sit idle instead of producing.
If we want a strong economy, focusing on corporate profits is a poor macro choice.
Thanks. i thought that would be your position but figured I’d ask. Keep promoting the message…at some point people will learn.
It’s interesting though… One would think though that profits are connected to demand, and that this chart is evidence against BHWTASWD. After all, if there was even more AD, profits would likely be higher. How does that chart break down in terms of revenues and costs? Are cost efficiencies the dominant explanation of the return to high profitability? How much more profit or revenue is needed to drive hiring?
One reason for the strength in corporate profits is govt transfer payment/deficit that transfers income to the private sector without the corresponding cost of labor. Separately, in NIPA accounting, Federal Reserve transfers to the Treasury are counted as corporate revenues (and presumably profits) (http://bit.ly/IlcEj4). Over the past couple years this has added about $75 billion, a non-trivial sum. There are certainly other reasons as well that others will hopefully add.
What the heck? Why would that be considered corporate revenue?
His point is workers spend but their wages are an expense for the business sector. When the govt kicks out the money, recipients spend but there’s no wage cost.
Sorry, I didn’t take your meaning. Apparently NIPA treats the Fed as if its not in govt sector. So when the Fed earnings get paid to Tsy, I guess they have to put its origination as somewhere other than govt sector. I guess corporate sector makes more sense than households.
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It’s a bit crazy, but during the 1990s corporate profits were quite low as a percentage of GDP, and their YoY nominal growth was low as well. The 1990s did not have massive CP, only good and stable CP.
Also, Apple is a huge part of current CP right now. take away apple and the rest are floundering. But we still have record corporate profits.
What’s a “cash register”?
Is there a split on corporate sectors?
Dean Baker, who is coming very close to agreeing totally with MMR, agrees with you fully on demand: “If a restaurant doesn’t have enough staff to serve its customers, it will lose customers. If a factory doesn’t have enough workers to fill its order then it loses orders. Increased demand forces businesses to use more labor.”
Thanks Tyler!
It’s all constraints and buffer stocks. Every sector has a buffer stock, and every sector has constraints. One constraint is demand for product, another constraint is employees.
Inventory is a buffer stock. Better hope your favorite restaurants don’t have unplanned inventory. At home we call it leftovers. For some restaurants it’s tomorrow’s soup special.
If you believe that we are in a balance sheet recsession with household deleveraging you are going to have large private surpluses (profits) and large government deficits with a stable or rising currency.