Notes and Numbers on the Profits Squeeze

Arthur M. Okun and

AMO

Arthur M. Okun

George L. Perry

George L. Perry Senior Fellow Emeritus - Economic Studies

DURING 1969, CORPORATE PROFITS averaged 9.2 percent of gross national product (GNP), a dramatic contrast to the 11.0 percent share of 1966. Still more striking, the indicated share in 1970 of 8.0 percent is much lower than that of the recession years 1961 (9.1 percent) and 1958 (8.7 percent), even after adjustment for the depreciation reform of 1962. The puzzling recent behavior of the corporate share is important in a great many economic issues, ranging from the calculation of full employment revenues (which depend on the estimated profit share at full employment) to the explanation of fluctuations in equity prices. This note attempts to pull together some calculations and clues on recent experience, and to offer a few tentative judgments on their implications.