The nation's workers may be struggling, but American companies just had their best quarter ever.
U.S. businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track more than 60 years ago, at least in nominal or noninflation-adjusted terms.
The government doesn't adjust the numbers for inflation, in part because these corporate profits can be affected by pricing changes across the world. The next-highest annual corporate profits level on record was in the third quarter of 2006, when they were $1.655 trillion.
Corporate profits have been doing extremely well for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history.
But thus far, many companies have been reluctant to add new workers.
This breakneck pace can be partly attributed to strong productivity growth — which means companies have been able to make more with less — as well as some of the profits of U.S. companies come from abroad. Economic conditions in the United States may still be sluggish, but many emerging markets like India and China are expanding rapidly.
The news of huge profits comes at a time when executive compensation and bonuses have drawn criticism for being way out of whack when compared with the pay for average workers.
Much of that ire is directed at the big Wall Street firms, which received hefty bailouts during the crises and are likely to pay out bigger bonuses this year than last year.
A recent survey shows that overall compensation in financial services will rise 5 percent this year, with employees in some businesses like asset management getting increases of 15 percent.
Tuesday's Commerce Department report also showed that the nation's output grew at a slightly faster pace than originally estimated last quarter. Its growth rate, of 2.5 percent a year in inflation-adjusted terms, is higher than the initial estimate of 2 percent.
The GDP revision was an encouraging sign, as gross domestic product, the broadest measure of economic activity, showed a marked improvement from the anemic 1.7 percent growth in the second quarter. Revisions showed stronger gains in consumer spending, exports and business investments.
Even so, analysts say GDP growth of at least 3 percent is needed to bring down the jobless figure — and many don't expect the economy to perform that well in the fourth quarter or early next year.
In fact, some Fed policymakers on Tuesday raised the specter of a permanently higher jobless rate for the U.S. economy, suggesting that many more workers will struggle to get back on their feet even as the economy continues to grow.
"The economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation," Paul Dales, a U.S. economist for Capital Economics, wrote in a note to clients. "This is unlikely to change in 2011 or 2012."
Economists also worry that consumer spending may weaken. Confidence remains low, and it's likely that unemployment benefits, which have helped prop up spending, will no longer be extended by lawmakers, given the new political sensitivity to big government deficits. Hundreds of thousands of jobless workers will see their benefits expire this month.
On Tuesday, Federal Reserve officials lowered their forecast for growth through the next year.
The economy will grow only 2.4 percent to 2.5 percent this year, Fed officials said Tuesday in an updated forecast. That's down sharply from a previous projection of 3 percent to 3.5 percent. Next year, the economy will expand by 3 percent to 3.6 percent, the Fed said, also much lower than its June forecast.
Fed officials project that unemployment also won't change much this year, averaging between 9.5 percent and 9.7 percent. The current unemployment rate is 9.6 percent.
Florida's jobless rate was flat, at 11.9 percent, even after employers added 6,900 jobs last month, the Labor Department said Tuesday. In the past year, the state has gained 35,700 jobs, its strongest 12-month gain since May 2007.
Progress in reducing unemployment has been "disappointingly slow," the central bank said, according to the minutes of its Nov. 2-3 meeting.
The darker view helps explain why the Fed decided at its meeting earlier this month to launch another round of stimulus. The central bank plans to buy $600 billion in Treasury bonds over the next eight months in an effort to lower interest rates and spur more spending.
The Fed is slightly more optimistic about 2012, in part because officials expect the bond-buying program to have a positive impact. The economy should grow 3.6 percent to 4.5 percent that year, a tick better than June's forecast of 3.5 percent to 4.5 percent.
Information from the New York Times, Washington Post and Tribune Washington Bureau was used in this report.