Public companies in a New York Fed economist’s study kept a larger share of sales as operating profit between 2019 and 2025, while their inflation-adjusted revenue per worker grew faster than in the previous decade.
Jeremy Pearce’s October 15 analysis puts sales-weighted average operating margins at about 16% of sales in 2019 and 18% in 2025, a rise of two percentage points. Gross margins, which deduct direct production costs, increased from about 34% to 37%. Operating margins also deduct overhead expenses.
The study uses public-company filings in Compustat. It excludes agriculture, utilities, finance, real estate and public administration because of productivity-measurement difficulties in those industries. Its findings are not a margin estimate for every U.S. business.
Real revenue per worker in the sample grew at an annual rate of 0.7% from 2010 to 2019 and 2.2% from 2019 to 2025. National nonfarm-business output per hour also accelerated, but the two measures are different: one uses company revenue and employment, the other aggregate nonfarm-business output and hours.
Firms with greater research-and-development spending relative to sales at the beginning of the period subsequently recorded larger operating-markup gains. Pearce leaves open whether wider margins represent returns to intangible investment or windfalls. The finding concerns an association, rather than proof that R&D caused the increase.
