The latest revision of US GDP for Q3 2011 also revealed another rise in corporate profits. According to the official data, corporate profits are now at an all-time high in nominal terms at $1977bn (after adjustments), or nearly 20% above the peak in Q3 2006 before the financial crash. Profits fell 42% from that peak to a trough in Q4 2008 before making a humongous 200% rise to the current level in Q3 2011. Corporate profits have been growing much faster than the US economy’s gross domestic product (GDP), so much so that corporate profits as a share of GDP have reached 13%, an all-time high. So the recovery in profits has been at the expense of income going to labour.
That’s no problem for capital,of course. But what is a problem is that, despite the huge rise in profits to new heights in absolute terms and relative to GDP, investment is not recovering. Business investment peaked in nominal terms at $1689bn at the beginning of 2008, just as the crash began. It fell 23% to the end of 2009, when it bottomed. It is now up to $1565bn, a rise of 20% from that bottom, but still 7.4% below its peak. So although profits are some 20% above their previous peak, business investment is still way below. Indeed, fixed investment as a share of corporate profits is at a new low for the decade.
This is the worst investment performance in any US slump since the war. US capitalist businesses are still on an investment strike. And with the lack of investment comes an insufficient rise in employment to get the unemployment rate significantly down. And it does not look promising from here. The growth in corporate profits has now slowed to pretty much the average rate of the last decade with signs that it is set to slow further.
As investment follows profit under capitalism and as it has done in the Great Recession, we can expect investment growth to slow from here too. The Great Recession continues to morph into below-trend economic growth at best, or a long depression at worst.