Thanks to Money Easing... US Companies Recorded Highest Profit Margins Since 1950 Last Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Last year, American companies recorded the highest profit margins since 1950.

According to Bloomberg News on the 30th (local time), the U.S. Department of Commerce announced through data that the total profits of American companies surged by 35% compared to the previous year. This result was due to strong demand fueled by cash distributed to households as the government injected money during the COVID-19 pandemic.

U.S. companies recorded an average quarterly profit margin exceeding 13% last year. Bloomberg reported, "This is unprecedented in over 70 years," adding, "In the past 70 years, quarterly profit margins have only exceeded 13% once." The profit margin of non-financial companies peaked at 15% in the second quarter of last year before slightly declining. In the fourth quarter, it was 13.9%.

Employee compensation at U.S. companies increased by 11% last year, but the share of workers' wages in national income fell back to pre-pandemic levels. Bloomberg assessed that this weakens the argument that wage increases among workers are currently driving inflation.

Earlier, on the 16th, Jerome Powell, Chair of the U.S. Federal Reserve (Fed), stated after announcing an interest rate hike that the mismatch between supply and demand is particularly pronounced in the labor market, leading to wage increases that do not align with inflation targets.

George Perkis, strategist at Bespoke Investment Group, said that the fact that corporate profit growth far exceeds wage increases shows that the view that workers' wage demands are driving up prices is incorrect. Referring to the unchanged share of workers' wages in total income, he evaluated, "This does not align at all with the wage-price spiral theory."

This content was produced with the assistance of AI translation services.