US Profits Just Peaked That Usually Means Jobs Are at Risk

The fattest profits in 70 years have helped sustain a pandemic hiring spree by US business. Now, margins are shrinking — and that could signal harder times ahead. Bloomberg's Katia Dmitrieva explains.

As earnings season nears its end, corporate America’s two-year run of surging profits appears to be over. Fourth-quarter earnings for S&P 500 companies are still high by pre-pandemic standards, but they’re down 2.3% from the previous period — the first drop since 2020, according to Bloomberg Intelligence. Net income margins are poised to shrink for a second straight quarter.

When earnings decline it can be a sign that job cuts are in the pipeline, as companies seek to protect their margins by lowering labor costs.

But the strength of that connection is trickier-than-usual to figure out right now. Profit numbers – like so many pandemic datasets — are in more-or-less uncharted territory, still near multi-decade highs, and the jobs market has been behaving strangely too.

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