In This Crappy Economy, Corporate Profits Soar

There's a disconnect between profitability and jobs

By Kevin Spak,  Newser Staff

Posted Jul 5, 2011 7:55 AM CDT

(Newser) – There's a whole lot of evidence that the US' economic recovery isn’t going well—unemployment remains too high, consumer lending too low, and consumer confidence in shambles—but one place you won’t find that evidence is on corporate balance sheets. US companies are poised to post big profits in the second quarter, the Wall Street Journal reports, exposing a disconnect between their wellbeing and that of the economy as a whole. One analysis estimates that combined Q2 earnings of companies in the S&P 500 will be up 13.6% over the same quarter of 2010.

“Corporate profits have been much stronger than the economy in general,” says one market strategist. Many companies cut costs (read: jobs) during the recession, and found that it improved their bottom lines when coupled with improvements in productivity. At the same time, demand from emerging markets has offset weak demand at home. But there are signs that can’t last forever; rising raw material prices could cut into profits during the rest of 2011, and retailers will keep feeling the pain if consumers don’t rebound.

A board on the floor of the New York Stock Exchange shows the closing number for the Dow Jones Industrial average, Feb. 1, 2011.
A board on the floor of the New York Stock Exchange shows the closing number for the Dow Jones Industrial average, Feb. 1, 2011.   (AP Photo/Richard Drew)
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