Post by addisona on Feb 11, 2022 11:43:56 GMT
The economy faces another winter of massive uncertainty. The pandemic rages on around the globe and a new coronavirus variant raises the specter of the health crisis getting much worse. Countering that uncertainty will require more business investments, among other things, that will strengthen the momentum of faster growth that carried the economy through the summer and into the fall. Employment and wages accelerated amid this faster growth, boosting the financial security of millions of hard-working Americans. Yet, highly (profitable) corporations are not investing. They are instead hoarding cash and rewarding shareholders. This raises pressure on Congress to boost public investments, beyond the already passed Infrastructure Investment and Jobs Act, to fill that hole left by private businesses. Without such additional investments, the recovery and the financial security of many families could be in jeopardy.
Corporate profits have recovered quickly from their depressed values in the spring of 2020. After-tax profits of nonfinancial corporations dropped by 26.5% in inflation-adjusted terms from the fourth quarter of 2019, just before the pandemic started, to the second quarter of 2020, according to Federal Reserve data. But, profits quickly turned around. Inflation-adjusted nonfinancial corporations’ profits were already 23.8% higher in the third quarter of 2020 than at the end of 2019. They kept rising from there. Profits for non-financial corporations were 63.1% higher in the third quarter of 2021 than at the end of 2019, after adjusting for inflation. Expressed as a ratio of after-tax profits to total assets, nonfinancial corporations’ profitability increased from 2.2% in the fourth quarter of 2019 to 3.3% in the third quarter of 2021. This represents a large increase of 51.6%. Nonfinancial corporations were more profitable in the middle of 2021 than at any point in the prior seven years as result of this jump. The pandemic caused only a small, temporary dent in the profits of most American businesses.
The speed of the current profit recovery is remarkable by historical comparisons. It took nonfinancial corporations until the first quarter of 2012 before their inflation-adjusted profits exceeded the levels recorded in 2007 before the Great Recession started. And, it took until the fourth quarter of 2002, more than year after the recession that followed the bursting of the dotcom bubble ended, for after-tax profits to reach their prior high from the middle of 1999 again. This time around, it took three quarters to exceed the pre-recession levels.
The return to massive profitability translated first into ever larger cash holdings for nonfinancial corporations. They held $6.9 trillion in liquid assets by the third quarter of 2021. This was the equivalent of 13.0% of all assets and 26.9% of nonfinancial corporations’ financial assets. These were the largest shares of assets since the fourth quarter of 2000.
www.forbes.com/sites/christianweller/2021/12/22/profitable-corporations-hoard-cash-reward-shareholders/?sh=66c7b6395570
Corporate profits have recovered quickly from their depressed values in the spring of 2020. After-tax profits of nonfinancial corporations dropped by 26.5% in inflation-adjusted terms from the fourth quarter of 2019, just before the pandemic started, to the second quarter of 2020, according to Federal Reserve data. But, profits quickly turned around. Inflation-adjusted nonfinancial corporations’ profits were already 23.8% higher in the third quarter of 2020 than at the end of 2019. They kept rising from there. Profits for non-financial corporations were 63.1% higher in the third quarter of 2021 than at the end of 2019, after adjusting for inflation. Expressed as a ratio of after-tax profits to total assets, nonfinancial corporations’ profitability increased from 2.2% in the fourth quarter of 2019 to 3.3% in the third quarter of 2021. This represents a large increase of 51.6%. Nonfinancial corporations were more profitable in the middle of 2021 than at any point in the prior seven years as result of this jump. The pandemic caused only a small, temporary dent in the profits of most American businesses.
The speed of the current profit recovery is remarkable by historical comparisons. It took nonfinancial corporations until the first quarter of 2012 before their inflation-adjusted profits exceeded the levels recorded in 2007 before the Great Recession started. And, it took until the fourth quarter of 2002, more than year after the recession that followed the bursting of the dotcom bubble ended, for after-tax profits to reach their prior high from the middle of 1999 again. This time around, it took three quarters to exceed the pre-recession levels.
The return to massive profitability translated first into ever larger cash holdings for nonfinancial corporations. They held $6.9 trillion in liquid assets by the third quarter of 2021. This was the equivalent of 13.0% of all assets and 26.9% of nonfinancial corporations’ financial assets. These were the largest shares of assets since the fourth quarter of 2000.
www.forbes.com/sites/christianweller/2021/12/22/profitable-corporations-hoard-cash-reward-shareholders/?sh=66c7b6395570