Today’s Fortune 500 Has More Workers, But Makes Less Money

This essay originally appeared in Power Sheet, Fortune’s daily leadership newsletter. Sign up here.

The Fortune 500 isn’t a group; it’s a place. Think of it as a 500-story office building with a company on each floor. The building is always full, but the tenants change from year to year. And since we assign companies to floors based on annual revenue, most of the companies that stay in the building have to move to new floors every year. With that image in mind, a look at the brand new Fortune 500 reveals important trends in the U.S. economy.

Our building’s tenants, America’s 500 largest companies by revenue, took in about a half-trillion dollars less revenue in 2015 than last year’s tenants did in 2014, and profits were less by about $100 billion, even though the U.S. and global economies were bigger. Total profits were 7% of sales, continuing a profit margin decline from the record 8.9% reached in 2013. And further declines seem likely. The 500’s profit margin has averaged 5.7% over the past 20 years, and I see no reason to expect a secular shift to higher margins. On the contrary, in an increasingly friction-free economy with information costs and transaction costs going to zero, maintaining margins may grow even more challenging.

A related trend: Even though this year’s 500 are in the aggregate smaller and less profitable than last year’s, they’re employing about a million more people. A welcome sign of job growth? Yes, maybe, and no. Yes, because more people working is generally a good thing. Maybe, because we don’t know where those people are; companies report employment worldwide, so the net additions could be anywhere. No, because less revenue and more workers means lower productivity, which is not a scenario for higher pay; the 500’s revenue per employee was $430,000, the lowest since 2011.

Looking more closely at the individual tenants of the 500 building brings a useful reminder of how company fortunes wax and wane and wax again. A truly fascinating graphic shows how energy companies were the No. 1 contributor to the 500’s profits just four years ago, but now they’re in last place, at No. 21, after reporting combined losses of $44 billion. By contrast, financial companies were near the bottom (No. 17) in 2009, but this year they’re No. 1, and three of the four most profitable companies in the 500 are financial firms – J.P. Morgan Chase, Berkshire Hathaway, and Wells Fargo.

But none of those three is the most profitable of them all. The winner by a mile is Apple (AAPL), which earned a staggering $53.4 billion last year, the largest profit of any company ever. The second-biggest earner, J.P. Morgan Chase (JPM), earned less than half that much, $24.4 billion.

Recalling the waxing-and-waning notion, what’s ahead? In April, Apple reported its first year-over-year revenue decline since 2003. Apple, like the energy business and the financial industry and the 500 as a whole, may well continue its long-term upward trajectory. But as all of them have shown and will certainly show again, that road is never smooth.

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