"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 1 hour Gold Bulls, Brace Yourselves – Fed Hikes Are Coming!
  • 4 hours Stocks Fail to Hold Gains, But Still No Correction
  • 6 hours Cryptojacking: A New Threat Vector To Critical Infrastructure
  • 22 hours Why The Next Oil Boom Will Be Fueled By Blockchain
  • 1 day 5 Things Investors Should Know About China this New Year
  • 1 day Is The South Korean Crypto-Drama Finally Over?
  • 1 day Miners’ Rally? What Rally? Watch Out for More Fake Moves!
  • 1 day Four Percent 10-year Note Yield Will Be a Floor Not a Ceiling
  • 1 day The End Is Near
  • 2 days 5 Record Breaking Gemstones Even Billionaires Can’t Buy
  • 2 days Irredeemable Currency De-tooths Savers
  • 2 days CFTC Offers Bounty For Crypto Pump And Dump Whistleblowers
  • 2 days Have You Been Getting Run Over By This Stock Market Action?
  • 2 days Decision Time
  • 2 days 1 Week Later, Risk Remains ‘On’ as 2 of 3 Amigos Ride On
  • 3 days The Most Polarized Commodity Ever
  • 3 days Commodity Coins and Us: What To Expect From The "Tokenization of Everything"
  • 3 days U.S. Dollar Bull and Bear Markets
  • 3 days GLD May Not Yet Be Ready To Break Out
  • 5 days Permanent Market Support Operations
Paul Kasriel

Paul Kasriel

Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director…

More Info

SP 500 Corporate Profits Leave Little Recession Doubt

Are we in a recession or are we not? The debate goes on. Take a look at the year-over-year change in operating profits of the S&P 500 corporations (see Chart 1). Profits have declined for three consecutive quarters through the first quarter of this year. Given reports of second-quarter profits to date and estimates of those corporate profits to be reported, it is a good bet that year-over-year profits will be down for four consecutive quarters. The data series in Chart 1 only goes back to the first quarter of 1989. But these limited data points suggest that the current behavior of corporate profits is signaling a recession. The data for year-over-year changes in reported S&P 500 profits (see Chart 2) start in the first quarter of 1965. The message is the same - current corporate profit behavior is consistent with past behavior in periods of recession.

Chart 1

Chart 2

Now, the nice thing about corporate profit data is that they do not get revised as do a lot of other data that go into the recession decision. (I suppose that there might be an exception to this when it comes to the profit data associated with Fannie and Freddie!) With the S&P 500 profits data there is no debate as to whether the Commerce Department is using a correct measure of prices to deflate nominal data. If Ben Stein wants to continue arguing that the U.S. economy has not yet slipped into a recession, as he did in Sunday's New York Times, so be it. In the meantime, those who are paying attention to the behavior of corporate profits continue to win Ben Stein's money.

 

Back to homepage

Leave a comment

Leave a comment




Don't Miss A Single Story