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Affluent Christian Investor | October 22, 2017

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Beyond Corporate Profits: TV Talking Heads Miss Loss of Small Business Income

Out of Business

Among television talking heads on stations like CNBC and Fox Business, the health of business tends to be measured only by corporate profits. That’s understandable given that these venues focus on the performance of stocks and bonds being traded in the public markets. And of course, corporate profits matter.

But there’s a lot more to the well-being and profitability of American business than just corporate profits. Almost always ignored is proprietors’ income, which is the income of sole proprietorships and partnerships, along with tax-exempt cooperatives.

Before the recent recession, annual corporate profits and nonfarm proprietors’ income both hit highs in 2006, and subsequently took dives. Corporate profits fell by 22.4 percent from 2006 to 2008. Proprietors’ income declined by 14.9 percent from 2006 to 2009.

The dichotomy since then, however, has been stark and troubling.

Corporate profits in the first quarter of 2013 registered $1,985 billion (annual rate). That was up by 23.4 percent compared to their 2006 level of $1,608.3 billion.

Meanwhile, proprietors’ income in the first quarter came in at $1,186.9 billion. That was up by a mere 7.5 percent versus the 2006 level of $1,103.6. Adjust the numbers for inflation, and real proprietors’ income over this period declined by about five percent.

So, in real terms, the income of a huge portion of American business has failed to return to 2006 levels.

Wonder why the U.S. economy has been suffering through one of the worst recoveries on record, while corporate profits have rebounded? Well, the decline of proprietors’ income over a period of six-plus years is a significant part of the answer.

Raymond J. Keating is chief economist for a national small business organization; a weekly columnist with Long Island Business News; a former Newsday weekly columnist; and an adjunct professor in the MBA program at the Townsend School of Business at Dowling College.

Author of numerous books, his latest business and policy books are “Chuck” vs. the Business World: Business Tips on TV and Unleashing Small Business Through IP: Protecting Intellectual Property, Driving Entrepreneurship. Keating also is a novelist, penning a series of Pastor Stephen Grant thrillers.

His articles have appeared in a wide range of additional periodicals, including The New York Times, The Wall Street Journal, The Washington Post, New York Post, Los Angeles Daily News, The Boston Globe, National Review, The Washington Times, Investor’s Business Daily, New York Daily News, Detroit Free Press, Chicago Tribune, Providence Journal Bulletin, and Cincinnati Enquirer.

 

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