1. Economic Snapshot
June 29, 2012
Corporate Profits Down for First Time in Three Years
Following what had been a strong post-recession recovery, business experienced a slowdown in the first
quarter of 2012 as the Bureau of Economic Analysis (BEA) reported this week that profits from current
production for U.S. corporations decreased $6.4 billion, or 0.3% compared to the end of 2011. It was the
first time that corporate profits reflected a quarterly decrease since the fourth quarter of 2008 when the
economy was deep in the recession.
A closer look at the data shows that the global economic problems stemming from the financial crisis
in Europe may be affecting U.S. companies. The BEA reported that profits outside of the U.S. decreased
$48.1 billion, meaning that domestic profits increased by $41.7 billion in the quarter.
Despite the recent stumble, profits remain near historical highs. When the recession ended in June
2009, corporate profits were the fastest major economic indicator to recover to pre-recession levels as
U.S. companies emerged more profitable and with more cash. Even with the most recent decline, profits
remain 57% above the level reported at the end of the recession.
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2. Economic Snapshot
June 29, 2012
However, companies have remained hesitant to increase payroll as employment has increased just over
2% since the end of the recession, while average hourly earnings and personal income have increased
just under 5%. It remains to be seen if the soft first quarter results will lead to greater hesitation from the
nation’s employers to hire new employees.
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