Corporate America in top shape, but labor share is decreasing
Summary
- The S&P 500's aggregate EPS grew by 53% year-on-year in Q2, marking the fastest growth since the COVID years, with profit share of national income reaching a post-WWII high of 18%.
- US GDP grew by 1.5% annualized, indicating that profit growth is driven by increased pricing power rather than sales volume, with corporate profit share of GDP consistently exceeding 10% over the past 16 years.
- US fixed investments rose by 8.5% year-on-year, with AI-related data center investments expected to drive future economic growth.
- The labor share of national income has fallen below 60%, the lowest since the 1950s, raising concerns about the sustainability of consumption due to stalled real income growth.
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Automatic translation: Originally published in Finnish 01/09/2026, 05:15 GMT. Give feedback here.
Corporate America appears to be in top shape based on the numbers. According to figures compiled by the WSJ, the aggregate EPS of the S&P 500 grew by as much as 53% year-on-year in Q2, representing the fastest growth since the COVID years. Notably, growth reached nearly 35% even without technology investments (see figure below). In addition, the profit share of national income rose to 18%, which is the highest level in the post-WWII era.
The development of corporate profits is pulling away from the real economy. At the same time, US GDP grew by "only" 1.5% annualized, meaning that profit growth is largely explained by an increase in pricing power rather than a rise in sales volumes. Historically speaking, this is also a structural change: between 1950 and 2010, the corporate profit share of GDP remained almost invariably below 10%, but over the past 16 years, the share has exceeded this threshold in almost every quarter, with the exception of the early stages of the COVID-19 pandemic. Companies' willingness to invest has also remained strong, as US fixed investments grew by 8.5% year-on-year, and the AI-related data center investment boom will be a strong growth driver for the entire economy in the coming years as well.
The flip side is the contraction of the labor share: the employees' share of national income has decreased to below 60%, the lowest level since the 1950s, and the rise in real incomes also stalled in July. The gap between profits and wage development has sparked political debate across the spectrum and raises questions about the sustainability of consumption in the longer term if wage development no longer supports household purchasing power.
US: Labor share of national income, ratio
Source: FRED
US: Real wage growth year-on-year, %
Source: Bloomberg
