The Strategist

US companies profitability in 2021 hits highest in 70 years

04/01/2022 - 10:09

Bloomberg reports that total profit of US corporations climbed by 35% in 2021, according to data from the US Department of Commerce.

Companies' profitability (profit to sales ratio) has exceeded 13 percent for four consecutive quarters, the highest level since 1950. These findings are mostly linked to the economy's recovery following the pandemic and increased consumer demand. Corporate pay climbed as well, though not as much as corporate profits: by 11%.

This year's performance is expected to be strong as well, according to experts. Despite the Fed's major rate hike, according to Robert King, Director of Research at the Jerome Levy Forecasting Center, household demand remains strong.

Mr. King predicts a "transition in funds from direct government support to private profit sources" by 2022. "High earnings stimulate businesses to hire more people, and in the current labor market, where there is a scarcity of workers, there is still room for big wage rise," he said.