Big Companies Set For Best Fourth Quarter Profit Ever

Even as unemployment remains high and Americans' finances slowly mend, big companies may be set for their most profitable fourth quarter on record.

Profits at S&P 500 companies are expected to have increased 20 percent between October and December, Bloomberg News reports. It would make for the best fourth quarter since Bloomberg started keeping records in 1992.

Companies benefited from stimulative government policy, but they also made money the old-fashioned way. Consumer spending, which constitutes about 70 percent of the nation's economic activity, helped boost profits, Bloomberg says, noting that estimated net income at Apple, one of the quarter's best performers, rose 47 percent last quarter. As demand for its products grew, Apple became the world's second most valuable company.

Big companies got a boost from rock-bottom interest rates, which have allowed them to hoard cash rather than use it to add jobs. In the third quarter, the most recent period for which such data are available, companies increased their cash holdings 7.3 percent, hitting a new record of $1.9 trillion in liquid assets. Relative to their short-term liabilities, U.S. companies haven't been this flush since 1956.

The jobless rate last year, meanwhile, hasn't been this high for nearly three decades. It fell slightly in December, to 9.4 percent from 9.8 percent, while the economy added 103,000 jobs, far fewer than many economists expected. While the economy does seem to be on the mend, real improvement in the lives of most Americans could still be a long way off.

Falling home prices continue to hammer household finances, eroding Americans' wealth and making them more vulnerable to default and foreclosure. Homeowners' equity, or the stake they can claim in their homes, dropped two percentage points in the third quarter, to 38.8 percent, ending five quarters of steady growth, according to Federal Reserve data.

Between this year and 2012, the Fed expects 7.4 million homes to enter foreclosure.