NEW YORK (TheStreet) -- Residents of Main Street may have trouble digesting their gargantuan Thanksgiving meals on Friday, but another kind of upset isn't sitting well with many Americans and an antacid pill won't make it go away: record corporate profits being reported while the employment outlook remains as bleak as a gray November day in New England.
The Commerce Department reported this week that American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, the highest figure recorded since the government began keeping track more than 60 years ago. Sure, the headlines didn't mention that the data isn't adjusted for inflation. Also, the third quarter pace of economic growth of 2.5%, which was the major Commerce data point, is the minimum growth rate needed to keep unemployment from rising further, according to the Fed. Still, neither of these points is the real troublesome footnote. The Federal Reserve released new projections this week indicating that unemployment will be rearing its ugly head -- lopped off, or not, by the pilgrim's axe -- for a long time to come. The Fed is now estimating that more than 10 million Americans will remain jobless through the 2012 elections. The current 9.6% national unemployment rate will only fall to 9% at the end of 2011, and 8% by the time the next presidential election is taking place, a weaker employment outlook from the Fed than it previously provided. Nevertheless, one must give thanks for some things. Companies are becoming increasingly productive, and productivity gains drive profits in a jobless recovery. Additionally, jobless claims actually fell in the most recent week by 34,000, to a total level of 407,000, and that marked a two-year low. Some economists were out on Wednesday saying that between the jobless claims positive surprise, and uptick in consumer spending and personal income, self-sustaining recovery was starting to be delivered. Stocks reacted enthusiastically. Yet corporations haven't been spending cash in a way that expresses this level of confidence. The record corporate profits have led to the biggest year in stock repurchase activity by U.S. corporations since the financial meltdown, buoying share prices. Spending cash on stock buybacks is often judged a conservative choice among corporate strategies. >>Top 10 S&P 500 Buybacks of 2010 One isn't seeing the New England forest for the trees just looking at productivity gains or one week of jobless claims, either. The picture is obscured when placed side by side with the Fed's newly sober outlook on unemployment. There is also an inverse relationship between productivity gains and need for new hires. Innovation driving more efficient operations is part of the old "American excellence" equation, and by its nature means jobs will be eliminated. Yet it also can be seen as corporate managers eeking out incremental gains already embedded in the system. 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