New Data Show Labor Share of Domestic Income Reached Record Low in Q4 2013 while Corporate Profits Reached Record High

New data released today by the Bureau of Economic Analysis showed that GDP grew slightly faster than previously estimated in the fourth quarter of 2013, an annual rate of 2.6 percent rather than the previously reported 2.4 percent. Consumption grew more strongly than previously estimated and investment slightly less strongly. Other components were little changed.

Today’s report also includes the first look at the composition of Gross Domestic Income for Q4 2013. The data show a continuation of recent shifts in income shares. As the following chart shows, the share of corporate profits in GDI rose to 12.65 percent, and the share of employee compensation, including wages, salaries, bonuses, and benefits, fell to 52.2 percent. These figures mark record highs and lows for these GDI components since 1947, the earliest year for which data are reported.

The following chart shows trends in the shares of major GDI components over the course of the Great Recession. In addition to compensation of employees and corporate profits, the chart shows the share of proprietors’ income, which includes the net income of proprietorships, partnerships, cooperatives, and other noncorporate enterprises. Proprietors’ income now accounts for 7.9 percent of GDI, up from its low for the recession, but it remains well below the levels of 10 to 15 percent that it reached in the 1950s. Several other small items make up the remainder of gross domestic income, including rental income of persons, net interest, and the net income of government enterprises, which is typically negative.

We can redraw the data in the previous chart to bring out the relative movements in the shares of GDI components more sharply. The next chart assigns a value of 100 to each component’s share in 2007, the year before the recession began. This chart shows that corporate profits were hit hard in the first months of the recession, but began to recover already by the end of 2008, when GDP was still falling. By the time the economy had officially entered the recovery phase in mid-2009, corporate profits were surging to new highs.>>>Read more