The WSJ noted the 7 percent falloff in profits in the second quarter compared with the year ago level and said that it "raised concerns about the employment outlook." It's not obvious that this should be the primary concern from falling profits.
Profits tend to be highly cyclical, with profits rising in the upturn, when employment is growing rapidly and falling during the downturn, however the link between profit growth and employment growth is not very tight. In the 90s, the profit share of output peaked in 1997, yet the economy continued to generate jobs at a very rapid pace until the last months of 2000. The same has been true in prior cycles, in which the cyclical peak occurred a year or more after the profit peak.
The American Prospect is nonprofit, reader-funded journalism—and we need your help.
Our reporters dig deep, hold power to account, and explain how policy shapes people’s lives. If you value independent journalism that goes beyond the headlines, now’s the time to support it.
Here’s how you can help: • Donate to power fearless reporting
• Subscribe to get our print magazine 6x/year.