How long can corporate America’s profit rebound continue?

AMERICANS used to love to hear tales of success in business. One of the many oddities of the current joyless economic recovery is that this traditional enthusiasm is strikingly lacking. Corporate America has bounced back impressively. The quarterly results season that is now nearly over has revealed that profits are back within a whisker of the all-time highs achieved before the downturn in late 2008. By some calculations, the rate of recovery of profits from their trough is the strongest since the end of the Great Depression.

Yet nobody seems pleased. Not investors, who have failed to push up share prices in the way this sort of earnings growth would have caused them to do at this stage of previous economic cycles. Certainly not politicians, who complain that firms are “hoarding” cash and creating hardly any new jobs. As Robert Reich, an economist at Berkeley and former labour secretary under Bill Clinton, puts it: “Bottom line: higher corporate profits no longer lead to higher employment. We’re witnessing a great decoupling of company profits from jobs.” …