America’s finance economy

Corporate Profits After Tax (CP), Profits After Tax for Nonfinancial Corporate Businesses (NFCPATAX), billions of dollars, measured quarterly, reported in a seasonally adjusted annual rate, 2002-2013.

Pre credit crunch, many folks acknowledged The United States had what is called a FIRE economy, or one that derives a significant amount of revenue from the FInance and REal estate sectors. Many people have suggested America migrate away a FIRE economy by encouraging economic activity in a more diverse range of sectors. How successful has that been?

The chart above shows two series modelled as area curves as follows: first, Corporate Profits After Tax (CP, the total of the red and brown curves) and Profits After Tax for Nonfinancial Corporate Businesses (NFCPATAX, brown curves) for the period 2002 to 2013. Each series is presented in billions of dollars, measure quarterly but reported in a seasonally adjusted annual rate. The Great Recession, which ran from December, 2007 to June, 2009 is indicated by the grey vertical bar. NB: I can’t source data for Financial Corporate Buinessess, however by looking at overall corporate profits and considering corporate profits for non financial businesses we can get an idea of just how large the FIRE sector of the US economy is. The FIRE sector is represented by the red area curve.

Before The Great Recession 46.44% of the US economy was based on Finance and Real Estate, compared to 47.64% post Great Recession. In other words, after The Great Recession the percentage of the US economy based on The FIRE sector has actually increased. The low of 44% was realised in January 2012. Other data points of interest – the FIRE sector accounted for a little more than 57% to total corporate profits in April, 2003, fell to a low of 44% in January, 2012 and is currently running at roughly 46% to total corporate profits.

So is America really moving away from an economy dominate by Finance and Real Estate? I don’t think so.

Finally, I’ve presented below what data I was able to gather on corporate profits generated by the real estate sector. It is relatively small by comparison to Finance and I didn’t include it in the main presentation since it is only available annually and was not sessionally adjusted. Below: Corporate profits after tax for Real estate and rental and leasing (N3258C0A144NBEA), Millions of Dollars, Annual, Not Seasonally Adjusted.

Corporate profits after tax: Domestic industries: Real estate and rental and leasing (N3258C0A144NBEA), Annual, Not Seasonally Adjusted, 1998-01-01 to 2011-01-01

Corporate profits after tax: Domestic industries: Real estate and rental and leasing (N3258C0A144NBEA), Annual, Not Seasonally Adjusted, 1998-01-01 to 2011-01-01

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