For the nonfinancial corporate business sector, using price per unit real gross value added.

Figure 1: Quarter-on-quarter inflation of price of gross value added (black line), contribution of unit labor costs (blue bar), of non-labor unit costs (brown), and of profits (green). NBER defined peak-to-trough recession dates shaded gray. Source: BEA 2023Q1 2nd release, Table 1.15, NBER, and author’s calculations.

Note that profits have added substantially, an accounting sense, to the price level of gross value added, in certain quarters (e.g., 2020Q3, 2021Q1-Q2), and deducted in others (e.g., 2020Q4)

The price of real gross value added for the nonfinancial corporate business sector is not a typically cited deflator. It’s useful to compare against CPI and PCE deflator.

Figure 2: Quarter-on-quarter inflation of price of gross value added (black line), of CPI (blue), of PCE deflator (tan). NBER defined peak-to-trough recession dates shaded gray. Source: BEA 2023Q1 2nd release, Table 1.15, BLS and BEA via FRED, NBER, and author’s calculations.

What’s the cumulative impact since the onset of the pandemic? This is shown in Figure 3.

Figure 3: Cumulative increase in price of gross value added (black line), cumulative contribution of unit labor costs (blue bar), of non-labor unit costs (brown), and of profits (green), all relative to 2020Q1. NBER defined peak-to-trough recession dates shaded gray. Source: BEA 2023Q1 2nd release, Table 1.15, NBER, and author’s calculations.

Note that labor costs are specifically unit labor costs; hence they incorporate changes in productivity.

The picture shows that while corporate profits are not inconsequential to price level increase, they are actually smaller — in proportion — than labor costs.

Update, 6/5/2023:

Andy Glover brings my attention to this FRBKC analysis which is more extensive and careful than mine!

Source: FRBKC (2023).

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