Monday, March 29, 2010
Rosenberg Daily - Q4 GDP up due to falling labor costs
Rosenberg, 3/29: [Based on the just-released Q4 GDP report] corporate profits soared at a 40% annual rate while labour compensation only rose at a 1% annual rate. If you are looking for a ‘V’, it has indeed been on profit margins or corporate earnings relative to the economy, which have surged from a low of 7.4% a year ago, to 11.3% currently. Not only is that an unprecedented swing (mostly on cost cutting) and now matches or exceeds every prior peak, save for the financial- induced earnings bubble in the last cycle (see Chart 9). This occurred despite the lack of top-line growth — per unit pricing in the nonfinancial sector deflated 0.2% YoY, but unit labour costs have been cut for three quarters in a row and by 2.7% — something we have not see happen in five decades.