Corporate profits have risen at an astounding 39.5% cumulative rate since Q4 2008, the fastest in U.S. history, according to Deutsche Bank. And what that means is a surge in hiring is coming (emphasis ours).
In the past, a rising share of profits to workers has always been a good gauge of hiring. Faster job gains are inevitable, provided the economy does not suffer a negative exogenous shock.
But it’s not all good news. Corporate profits are likely to fall at some point, and it seems to have already happened, if Deutsche Bank’s analysis of corporate taxes is correct (emphasis ours).
According to our calculations, corporate tax receipts were up 30.9% as of September 3rd. While this is down from a peak rate of 45.5% as of May 31, the current growth rate is clearly robust and would be consistent with at least another double-digit sequential gain in corporate profits again this quarter.
So even the bad news is good news. Deutsche Bank suggests the continuing strength in corporate profits is a sign we won’t enter a double dip (emphasis ours).
Importantly, the continued strength in corporate profits should quell concerns about a double-dip in output, because the economy has never gone into recession when corporate profits have been growing as strongly as they have been.
Take a look at the rate of corporate tax increases, a sign of the massive profit boom: