There Have Actually Been Some Jobs Saved, Only In Place Of Recovery

Not only is that the highest on record, it shatters the previous high from way back in 2014 (though still woefully short of the pre-crisis bull market trend).

So, why aren’t companies bringing back workers by the busload?

As I had previously pointed out with the release of the preliminary Q3 GDP estimates, in a word, subsidies.

The BEA’s updated data gives us a pretty good sense of how these have impacted specifically corporate business (and non-corporate proprietor’s firms, too, but our focus here is on corporates). The major component in the government subsidies, so far as corporate profits are concerned, has been the Paycheck Protection Program (PPP) in which the federal government initially lent hundreds of billions to companies of all sizes.

Those loans have been categorized instead as subsidies because that’s really what they are. So long as any business uses the funds as the government intends, not reducing payrolls, as the name implies, these loans will convert into grants, meaning for GDI purposes they aren’t treated as corporate loans but, again, corporate subsidies.

Very profitable ones.

The numbers are, as expected, massive:
 

The figures shown above are seasonally-adjusted annual rates, but still, the contributions so far as corporate profits (and proprietor’s profits) are concerned are unlike anything ever seen before. You can’t really subtract the amount of the PPP subsidy paid to corporate business shown above ($559.3 billion) from the GDP estimate of corporate profits, but if you did just to get another back-of-the-envelope sense of where things stand it would reduce economic profits down to somewhere probably less than what was figured for Q1 2020.

Q1 had already put Corporate America in a huge hole.

And it only gets worse from there; if you use profit estimates taken before taxes, cuts to which have also increased bottom lines, while also including IVA and CCadj, even with these massive subsidies the estimated aggregate for Q3 was barely equal to what it had been in Q4 last year.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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