US corporate profits return to record levels

While millions of Americans confront the daily miseries of unemployment, home foreclosure and poverty as a result of the economic crisis, corporate profits are soaring.

Walmart, the world’s largest retail chain, announced last week that its profits grew by 27 percent in the fourth quarter of 2010, while sales at US stores have declined for the second year in a row. The company made $6 billion in profits in the fourth quarter, up from $4.8 billion a year before and $3.5 billion in the third quarter of 2010.

Home Depot posted a 72 percent increase in profits, after sales increased by 3.8 percent in the fourth quarter. Profits reached $587 million, up from $342 million a year earlier.

Hundreds of companies have posted similar figures. The story is the same: sales and revenues have fallen or ticked up slightly, while profits have grown by double digits.

The discrepancy between revenues and profits is due to the fact that the “recovery” in corporate balance sheets is built on layoffs and speedups. “A lot of the recent profits are based on the revenue from cost-cutting,” said James L. Butkeiwiz, professor of economics at the University of Delaware, in a telephone interview.

Walmart, for instance, cut over 11,000 jobs at its Sam’s Club warehouse stores in January 2010, about 10 percent of the subsidiary’s workforce. Home Depot cut 7,000 jobs in 2009 and shuttered 34 of its Expo home design stores in 2009.

Corporate profits reached an annual rate of $1.659 trillion in the third quarter of 2010, and it is possible that fourth quarter profits, which have not yet been aggregated, were even higher.

As a result of these record profits, companies have found themselves with huge stockpiles of cash. US corporations had a record $1.93 trillion in cash and similar assets in December, the last time figures were released.

Instead of investing, companies have used this cash to buy back their own stocks, enriching executives and shareholders without creating jobs. In January 2011, stock buybacks reached their highest level since the start of the economic downturn. That month, companies bought back $57 billion in shares, compared to $357 billion for all of last year, according to Trimtabs, the finance data company.

via www.wsws.org

Comments

[Intellectualanarchy.blogspot.com]

these statistics point to this 'downturn' is being used by the transnationals to fundamentally restructure their operations and push down wages (by firing higher earners and, when they do hire, do so at a much lower rate). this is systemic, not temporary. they (the top 1%) see this as a golden, once-in-a-lifetime opportunity to radically remodel their business model in order to make their already oversized salaries larger, and permanent.