EarningsCenter

How Record Corporate Profits Are Coming Out of Workers' HidesThe Commerce Department reports that corporate profits have never been higher in American history, so why aren't Republicans -- the party of business -- celebrating the news? After all, those profits are coming not from revenue growth -- which would benefit workers and executives -- but from cost cutting. It's that cost cutting that is keeping the unemployment rate at 9.5%, while allowing more of companies' meager revenue growth to flow to the bottom line.

How historic is this accomplishment? The New York Times calculated that at $1.66 trillion, U.S. corporations are on track for annualized profits that are the highest since such records were first kept back in 1950, and notes that the gains in profits are due mostly to rising productivity.

That productivity boost came as workers spent more hours working, and getting paid less to do it. Specifically, between the third quarter of 2009 and the same period on 2010, productivity was up 2.5% as output rose 4.1%, hours worked increased 1.6%, and unit labor costs fell 1.9%, according to the Bureau of Labor Statistics.

The profits of U.S. corporations are growing much faster than their revenues. S&P's Howard Silverblatt estimated that corporate profits in 2010's third quarter would rise 18% from 2009, while sales would be up a mere 5.5%. And The Wall Street Journal reported that "Overseas growth is clearly a driving factor for much of the profit gains."

Big companies are naturally focused on selling their products in overseas markets where demand growth is greater than it is at home. They're also hiring workers in many of those countries, and pushing their U.S. workers to work harder for less money. As long as there are workers outside the U.S. willing to do similar jobs for lower pay, there is nothing to stop this trend from continuing.

Corporations booking record profits at the expense of workers is nothing that Democrats would want to celebrate, but if a Republican was in the White House, the GOP faithful would be crowing about the record-breaking numbers. Since a Democrat is overseeing the economy, though, news of this economic milestone will pass without comment from the wing of the media that wants nothing more than to get one of its own paid commentators into the Oval Office.


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