Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

AI Summary. U.S. corporate profits reached $4tn, 2.3 percentage points higher as a share of national income than before the COVID-19 pandemic, an increase driven by domestic nonfinancial industries and offset mainly by declines in net interest and miscellaneous asset payments and in income of unincorporated businesses. Employee compensation's share edged down, and higher profits mostly went to shareholders through dividends.

Ricardo Marto Federal Reserve Bank of St. Louis
Date Posted:

Corporate profits averaged 13.9% of national income over the 2010-19 period, rising to 16.2% of national income as of the last quarter of 2024.

What is driving the rise in corporate profits' share of national income?

Core argument: The rise in corporate profits as a share of national income began in late 2020, mostly at the expense of net interest and miscellaneous payments on assets and proprietors' income, while employee compensation slipped from a 2010–19 average of 61.8% to 61.6%.

Corporate profits have been elevated since the onset of the COVID-19 pandemic. As of the last quarter of 2024, they were $4 trillion—2.3 percentage points higher as a fraction of national income than they were prior to the pandemic. The increase was entirely driven by domestic nonfinancial industries. The surge in corporate profits as a share of national income began in late 2020, mostly at the expense of a decline in net interest and miscellaneous payments on assets (interest paid less interest received and royalty payments) and proprietors’ income (income earned by unincorporated businesses). In contrast, employee compensation as a share of national income marginally decreased. It averaged 61.8% of national income over the 2010-19 period and was 61.6% in the last quarter of 2024. Notably, retail and wholesale trade, construction, manufacturing and health care experienced a marked increase in profitability. Higher corporate profits mostly went to rewarding shareholders via higher dividends.

Takeaways by Macro Roundup® AI

  1. The rise in corporate profits as a share of national income began in late 2020, mostly at the expense of net interest and miscellaneous payments on assets and proprietors' income, while employee compensation slipped from a 2010–19 average of 61.8% to 61.6%.
  2. Retail and wholesale trade, construction, manufacturing, and health care showed marked increases in profitability, and higher corporate profits mostly went to shareholders via higher dividends.

Related Articles:

  • Corporate Profits in the Aftermath of COVID-19 — Nonfinancial corporate profit margins—profits as a share of gross value added—rose to about 19% before easing to 15%, compared with about 13% before the pandemic. The authors attribute much of the increase to large direct government support for small and medium-sized U.S. businesses and to lower net interest expenses under accommodative monetary policy.
  • The Curious Incident of the Elevated Profit Margins — The US fiscal deficit averaged just under 3% of gross national product from 1950 to 2011 but 6.6% from 2012 to 2022, driven mainly by health and social security spending, a pattern that holds excluding pandemic years. Even assuming permanently elevated profit margins, US equity valuations imply low long-run returns.
  • The Trade War Will Pound Stocks — Efforts to cut U.S. trade deficits and escalate tensions with allies risk deterring foreign capital, and foreigners need only stop buying U.S. assets to hit prices, as China and Russia already have. Bridgewater estimates nonfinancial U.S. firms capture 39% of global profits though the U.S. is 15% of world output.
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