Special accounting items, generally seen as one-off adjustments, now predict wage growth and productivity trends better than traditional profit metrics, revealing a fundamental shift in how earnings data signals economic conditions.

Hengda Jin, assistant professor in Mays Business School’s James Benjamin Department of Accounting at Texas A&M University, along with Lindsey A. Gallo (University of Michigan), and Suhas A. Sridharan (Emory University) discovered that aggregate corporate earnings gained predictive power for GDP growth after 2000, with special items — restructuring charges, asset write-downs, and unusual gains — emerging as the strongest indicators. Their research in the Journal of Accounting and Economics challenges conventional wisdom about which financial metrics matter for economic forecasting.

Key findings from the analysis:

• Special items transformed from being dismissed as company-specific noise into some of the most useful signals of where productivity and wages are headed, while core earnings maintained limited predictive value across all time periods
• The predictive relationship stems specifically from special items’ ability to signal future wage trends, reflecting deeper connections between corporate performance and labor markets
• Before 2000, aggregate earnings showed no consistent ability to forecast GDP growth. Around the turn of the century, however, globalization, technological advancement, and fundamental changes in how companies structure operations and report financial results reshaped how earnings connect to the broader economy.

The research arrives as policymakers and investors grapple with interpreting corporate earnings amid economic uncertainty. Understanding that special items — not headline profits — contain tomorrow’s economic signals offers a crucial edge for analysts, asset managers, and business leaders navigating volatile markets.

For those parsing earnings reports, the message is clear: the real economic story lies in the details of financial statements, not just the headline profits.

Read the full paper here

Hengda Jin

Assistant Professor

James Benjamin Department of Accounting

hjin@mays.tamu.edu