U.S.: What Could Spoil The Profits Party

Revenues are strong, but costlier payrolls threaten to squeeze margins

It's getting tougher to make a buck. Throughout this six-year expansion, Corporate America has been on a roll, as massive cost-cutting and efficiency gains have boosted not just profits but also the ability to squeeze more earnings from a unit of output. In coming quarters, however, the economic climate is shaping up to be a lot less profit-friendly, especially with regard to costs. And investors who have gotten used to double-digit gains in earnings may have to lower their expectations to single-digit territory.

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