America's recession was cruel to capi-tal and labour: both employment and profit margins collapsed. The recovery has been a different matter. Employment has barely grown and unemployment is near its peak, but profits are on a tear. Pre-tax profits were $1.7 trillion, annualised, in the third quarter, just topping their 2006 peak, though as a share of gross domestic income they remain short of a record. Corporate earnings have benefited from both the return to profitability of the banks and the growing contribution of foreign operations-gross overseas profits now represent a third of the total. Robert Mellman of JPMorgan Chase eliminates the effects of both write-offs and foreign activity by examining only domestic profits as a share of corporate value added. The resulting picture is even starker.
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