>Does anyone have any thoughts about what exactly is behind the awful
>corporate profit picture right now? The guy from First Call was on CNN last
>weekend rattling off a series of unbelievably atrocious earnings numbers,
>both estimates of Q1 and forecasts of Q2, Q3, and Q4. Profits for S&P 500
>companies seem to be falling at double-digit rates. I can't understand how
>this is possible in an economy that is, after all, expanding, albeit at a
>tortoise-like pace. Am I wrong to say that either (a) aggregate expenditure
>must be falling in the economy or (b) labor costs are zooming leading to a
>sizeable redistribution of national income from profits to wages? Of course,
>there was a glut of investment. But the carnage doesn't seem to be limited
>to companies that make investment goods.
It seems to be a combination of higher wages, higher fuel costs, flat prices, and higher debt service costs. The national income account numbers aren't falling as hard as the S&P numbers (but they didn't rise as much during the boom either).
U.S. corporate profitability peaked in late 96/early 97, and has been flat-to-down since. It makes you wonder where the alleged productivity boom is paying off.
Doug