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Home Publications Blogs Beat the Press While the Country Slept: Financial Industry Profits Go Through the Roof

While the Country Slept: Financial Industry Profits Go Through the Roof

Saturday, 30 July 2011 07:54

Okay, the country wasn't exactly sleeping, it was watching the Boehner-Tea Party charade about whether we should default on the national debt. While this process captivated the nation, the Commerce Department released new data on GDP. The pathetic second quarter GDP number, combined with the sharp downward revision to the first quarter got some attention. The 0.8 average growth rate over the first half of the year is well below the 2.5 percent rate needed to keep even with the rate of growth of the labor force. This means that rather than making up ground lost in the recession, we are actually going the wrong way. The economy is falling further below its potential and unemployment is likely to continue to rise.

While this situation got some attention in the news reports, all the accounts I saw completely missed the upward revision to profits. The revised data showed sharply higher profits for both 2009 and 2010. In fact, in the revised data, profits accounted for 23.8 percent of income in the domestic corporate sector in 2010. This is more than a full percentage above the previous peak. Within the corporate sector, the financial industry is the big winner, accounting for 31.7 percent of corporate profits in 2010. This movement in profits is no doubt attributable to all the regulations and taxes imposed by President Obama.

Anyhow, you didn't hear about this from the media because they had to present you with the latest from Tea Party gang, but there are some people who do actually look at economic data.

Comments (6)Add Comment
written by Jay, July 30, 2011 10:07
The profit numbers probably really show how much cost cutting has been done. The stock market has been doing very well. So it's no surprise finance has done well too. It will be interesting to see what happens when things improve and these companies don't have enough employees to meet demand after cutting people to increase profits.
written by skeptonomist, July 30, 2011 5:02
Also see Dan Froomkin at HuffPo on Oil Company profits. Froomkin of course formerly wrote for the WaPo, which still has some good reporters, but their policy has been to squeeze out, whenever possible, anyone who does not toe the "centrist" line.
written by REX D NUTTING, July 30, 2011 5:53
Dean: Profits now account for a larger share of GDP than at any time in the past 60 years.

Wages are at the lowest levels in 56 years.

Read my story about it on MarketWatch: http://tinyurl.com/4xrkg2w
written by skeptonomist, July 31, 2011 9:18
Corporate profits really exploded around 1995. There was a very short, sharp downturn and then return to the high levels. What puzzles me is where the demand comes from to maintain high profits. Even the finance industry has to get some money from the economy.
written by skeptonomist, July 31, 2011 9:21
Oops, I meant profits jumped up around 2005, not 1995 They did in 1995 too, as a result of the commercialization of the Internet - no such event that I know of in 2005.
Q on GDP vs. E
written by Mark Erickson, July 31, 2011 4:23
Don't you need to say how many jobs were created each month to keep up with oboe force growth? GDP doesn't track perfectly with job grow, so how can a GDP growth rate imply whether job growth is enough for the new entrants?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.