Even as the economy struggles, corporate profits continue to rise. Wells Fargo, the largest consumer lender in America, announced today that its third-quarter earnings rose 21 percent, to $4.1 billion. Citigroup, the nation’s third-largest bank, also released its earnings statement today, announcing that its third-quarter earnings rose 73 percent over last year, with $3.8 billion in profits. Even though JP Morgan Chase saw its earnings fall from a year ago, it still raked in more than $3 billion in profits.
Corporate profits as a share of the nation’s gross domestic product, in fact, are at their highest point since 1950. Recent snapshots, however, tell a much different story on Main Street, where small businesses are limping through an economic recovery that treated corporations much more kindly. According to the National Federation of Independent Businesses’ September report, two out of every five small businesses reported that profits are falling:
Reports of positive earnings trends were 1 point worse in September at a net negative 27 percent of all owners, not a pretty picture, but still one of the best readings in years. Not seasonally adjusted, 17 percent reported profits higher (down 3 points), and 40 percent reported profits falling (unchanged). Corporate profits are at a record high level as a share of GDP, but the story is very different on Main Street.
Small business sales are also dragging, as the percentage of all firms reporting higher sales fell over the last three months, and more businesses reported sales trending down than up. Worse yet, small business owners expect sales to continue falling over the next three months.
Corporations aren’t content just ignoring these problems, instead choosing to help exacerbate them. The largest corporations have continued hoarding cash instead of investing in job creation that would help small businesses and the economy recover. At other times, they’ve spent millions lobbying for ineffective tax holidays or lax regulatory rules that led to the 2008 financial crisis. They continue to pay some of the world’s lowest tax rates. And executive pay at the largest companies continues to rise even as wages remain stagnant for most American employees. That has led to growing income inequality that rivals many African nations, saddling the American economy with problems that are becoming increasingly hard to fix.