The Case for Optimism, Part IV: Best Quarter for Company Profits Ever

More

Read more cases for optimism! Part I here, Part II here, Part III here.

American companies just had their best quarter ever, raking in profits at an annual rate of $1.66 trillion, Catherine Rampell reports in the New York Times. Corporate profits have been on a roll for the last year, but the unemployment rate is frozen between 9 and 10 percent. What gives?

There are all sorts of credible explanations for why profits are recovering faster than jobs, including but not limited to: (1) Unemployment is a lagging indicator anyway, because companies don't hire in big batches until they have a dependable flow of income; (2) Executives have become more obsessed with earnings reports since their compensation became more tied to stock prices in the 1990s; and (3) Technology and globalization have nibbled away at middle-education, middle-pay positions.

It's easy to be sickened by the garish gap between corporate profits and unemployment. But remember: In a slow economy, record corporate profits are good news!

DESCRIPTIONSour

In order for big companies to add millions of workers per year, they need money. Lots of lots of money. More huge quarters like this one, on the back of rising consumer spending and falling productivity growth, will force companies to add workers to keep up with demand. More workers working will grow demand get even more workers working.

The system feeds itself. But first we need companies to take a bite -- to capitalize on their historically large appetite for new machines and new workers.

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity


Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

CrossFit Versus Yoga: Choose a Side

How a workout becomes a social identity

Video

Is Technology Making Us Better Storytellers?

The minds behind House of Cards and The Moth weigh in.

Video

A Short Film That Skewers Hollywood

A studio executive concocts an animated blockbuster. Who cares about the story?

Video

In Online Dating, Everyone's a Little Bit Racist

The co-founder of OKCupid shares findings from his analysis of millions of users' data.

Video

What Is a Sandwich?

We're overthinking sandwiches, so you don't have to.

Video

Let's Talk About Not Smoking

Why does smoking maintain its allure? James Hamblin seeks the wisdom of a cool person.

Writers

Up
Down

More in Business

Just In