By New Deal Democrat
The important long leading indicator of corporate profits was reported yesterday for the third quarter.
The good news is corporate profits increased significantly, whether measured nominally or adjusted by unit labor costs (the adjustment preferred by Prof. Geoffrey Moore who identified corporate profits as a long leading indicator).
The bad news is also evident from the graph. Regardless of which way you measure, corporate profits are still below their peak from several years ago. In particular, adjusted by unit labor costs, corporate profits are still 9% less than they were at their peak in 2012.
So, the profit recession has bottomed - as of Q4 of last year. But before you get too excited about the end of the profit recession, consider that industrial production isn't exactly setting the world on fire.
And because profits are below their peak for this expansion, they are one indicator which has still given the necessary signal to be consistent with an oncoming recession.