Corporate profits are a long leading indicator, as they typically turn down at least one year before the onset of a recession.

Unfortunately, they are typically reported with a lag, and Q4 corporate profits aren’t reported officially until the final update of the relevant GDP report. Which means that they weren’t reported for Q4 last year until today. That’s why I use the proxy of proprietors’ income, which is almost as leading, 

With that caveat out of the way, Q4 corporate profits (dark blue in the graph below) increased 6.7% q/q on an unadjusted basis. Adjusted for unit labor costs (the “official” way to measure them as a leading indicator)(light blue), they increased 5.8%. This is in line with the increase in proprietors’ income (red), previously reported:

(Click on image to enlarge)

Note that, as usual, proprietors’ income also forecast an increase. This is also in line with what S&P 500 companies have been reporting to Wall Street, which I update weekly as part of that report:

(Click on image to enlarge)

The bottom line is that corporate profits have increased consistently since Q1 2023. Absent external factors (like the imposition of widespread tariffs!), they are forecasting no recession in 2025.

More By This Author: