The fact that unit labour costs do not accelerate and corporate profitability continues to increase at the end of expansion periods completely changes the cyclical outlook

At the end of expansion periods in the past, the acceleration in wages led to a decline in corporate profitability, and therefore to a deterioration in companies' financial situation and in credit quality, which worsened recessions (due to the rise in default rates and the decline in companies’ spending). But nowadays (we look at the situations of the United States and the euro zone), due to the weak acceleration in wages (and the tax reform in the United States), companies' profitability, financial situation and credit quality improves. So the weak reaction of wages to the fall in unemployment currently prevents a situation where a decline in corporate profitability worse ns the cyclical downturn at the end of the expansion period, which is a very important factor to take into account