Wednesday, February 13, 2013

Corporate Profits vs. Wages

Click to enlarge.

It's déjà vu all over again. - Yogi Berra

Source Data:
St. Louis Fed: Corporate Profits / Wages


Stagflationary Mark said...

Just so we're clear...

The trend in black goes only with the black data. The same goes for all the other colors.

The red trend line is actually extrapolated out to 2015. Keep in mind that it cannot accurately predict the future, but hindsight may show that it was a reasonable estimate. Who knows?

The polynomial trend lines are 2nd order, which would be the physics of a baseball that's been hit into the air if one neglects air friction.

I would argue that the bat in this case is unprecedented and unsustainable monetary and fiscal stimulus (borrowing from the future to keep things elevated today). As in baseball, good luck on the ball staying elevated permanently.

I remain incredibly bearish on our long-term future. Sigh.

Stagflationary Mark said...

Those who trust the "E" in the average "P/E" must sleep very well at night (think Jeremy Siegel).

I guess I'm just a heck of a lot more cynical.

Fritz_O said...

If history is any guide, that % must come way down before we could enter the next recession. Yet, it feels as if we're in one now.

1.) It's different this time,
2.) We live in interesting times,
3.) In Fed we trust.

Mr Slippery said...

I am trying to understand how profits got so out of line with wages.

Just some off the cuff guesses:
1) death of private unions and now public unions
2) massive unemployment and underemployment
3) chinese labor is cheap
4) robots don't get wages

All of these things work against Obama's cry for creating middle class jobs. Oh, and Obamacare is creating a new wave of uninsured part time workers.

Stagflationary Mark said...


We live in interesting times! ;)

Stagflationary Mark said...

Mr Slippery,

5) These men mean businesses!

Troy said...

the bat in this case is unprecedented and unsustainable monetary and fiscal stimulus (borrowing from the future to keep things elevated today)

I see the stimulus as counteracting the moneyflow we're losing to China.

Now, the Triffin Dilemma makes analysis difficult, but at the end of the year there's hundreds of billions leaving our economy and not returning.

Well, shows the world re-cycled $550B into our economy via treasury purchases, so there's that.

And paying off those bonds with exported goods and services and not more promises is where we hit J Wellington's "next week", yes.

But the first-order problem IMV is our trade deficit, and the only way to fix that is a much weaker USD regime.

And to get that, we need to Fed to run the presses, yes?