- by New Deal democrat
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:
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:
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.
