Profits are Extremely Pro-cyclical.

At the early stages of recovery, inventories go down, with sales surpassing production and injecting new liquidity to the business. The following increase in production is obtained by a higher production utilization of plants and employment. Productivity steeply rise and profits as well.

During recovery and boom, employment and capital accumulation (investments) can go hand in hand, increasing absolute profits if not profitability.

At the end of the boom phase, high interest rates on loans (taken for funding investment and discretionary costs) hurt profits, as well as higher wages can do.

Often unexpected, the demand downturn make inventories piling up, freezing resources and forcing a fall in production. Before this adjustment takes place, profits plunge even into negative values.