Profit-led stagnation?

So a new paper published by the Center for Labor Market Studies shows that the recovery in the US has been wageless and jobless.  The graphs below which show the variation of the Dow Jones Index, Corporate Profits, and Average Hourly Earnings in the Private Sector (from figure 14 in the paper), and Real GDP , Investment and Payroll Employment (using BEA data) illustrate the point.

It is clear that conservative calls for tax cuts for the wealthy do NOT work.  Profits go up, but jobs do not increase.  Wealthy corporations are not ncessarily job creators. Also, any heterodox story about profit-led growth seems also incorrect.  Again, why would firms invest if there is no demand?  The increase in demand is not robust enough to lead to investment or employment creation.  In fact, while corporate profits increased 39.6 per cent between the second quarter of 2009 and the first of 2011, investment only increased 7.6 percent.  This recovery is just for the rich.


  1. The productivity, output per worker remains buoyant. Looks like Kalecki's argument is coming to fruition. The firms continue to maintain temporary high level of unemployment to squeeze greater work effort out of their workers.

  2. Well, Kalecki was really about the short run. The use of profits in the investment function is related to the accelerator. That is, higher profits are an indicator of growing demand, and, hence, investment should follow. The trend was exogenous in Kalecki. The profit-led story is about growth (the trend) being driven by profits. The point is that profits are not a good indicator of growing demand in the US.


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