Another recession coming?

As the jobs numbers and other economic data start retreating, one bright spot has been corporate earnings.  In part, businesses survived by extracting maximum efficiency during the 2007-8 Great Recession, and held onto earnings as the investment climate became more and more hostile.  Now even that bright spot may be coming to an end, according to CNBC, as earnings forecasts grow the most pessimistic since 2008:

While this quarter’s earnings reports have crossed a substantially lowered profit bar, future expectations through the year indicate a recession could be on the way.

Estimates for the third and fourth quarters have been dropped to levels not seen since the days of the 2008 financial crisis, below even the muted 2 percent expected level of inflation.

That’s an ominous recession sign for an economy that has barely managed to attain positive growth this year even with the strong level of earnings beats, according to an analysis by Nicholas Colas, chief market strategist at ConvergEx in New York.

“Revenue estimates for the back half of 2012 have been slowly working their way lower this year,” Colas said. “This trend, however, has accelerated to the downside over the past 30 days and we are fast approaching levels where these estimates are unambiguously pointing to the risk of a U.S./global recession later into 2012 and 2013.”

This, of course, deals with the technical definition of recession.  In order to have a true recession in the technical sense, an economy has to suffer negative growth (contraction) for two successive quarters.  We have not yet had one quarter of contraction, but the recent indicators show the economy heading in that direction.

For many Americans, however, the economy never really rebounded in the first place.  More than three years after the start of the technical recovery, poverty levels will soon rise above anything seen in the US since the 1960s:

The ranks of America’s poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net.

Census figures for 2011 will be released this fall in the critical weeks ahead of the November elections.

The Associated Press surveyed more than a dozen economists, think tanks and academics, both nonpartisan and those with known liberal or conservative leanings, and found a broad consensus: The official poverty rate will rise from 15.1 percent in 2010, climbing as high as 15.7 percent. Several predicted a more modest gain, but even a 0.1 percentage point increase would put poverty at the highest level since 1965.

The economists interviewed by the AP point to low-wage jobs, but that’s not the real problem; it’s a lack of any jobs:

Poverty is closely tied to joblessness. While the unemployment rate improved from 9.6 percent in 2010 to 8.9 percent in 2011, the employment-population ratio remained largely unchanged, meaning many discouraged workers simply stopped looking for work. Food stamp rolls, another indicator of poverty, also grew.

During this three-year recovery, we have not added enough jobs to keep pace with population growth.  We add somewhere between 125,000 to 150,000 working-age adults on average each month, but we have only added 65,200 jobs on average each month since June 2009, the start of the recovery. That means that we have gone backwards in terms of population growth by more than 2.2 million jobs that we needed just to keep pace.  Thanks to the depressed job market, wages remain low because of the huge numbers of people who seek work, and the huge numbers of people who have given up out of despair.

Until this recovery, the aggregation of solid earnings after a recovery preceded expansion and job growth.  In this recovery, the massive amount of regulation — and especially the ambiguities of regulation in ObamaCare and Dodd-Frank — along with tax-policy signals has forced companies to shield earnings and capital rather than invest in expansion.  Until those policies change, our economy won’t expand, won’t add new jobs at a rate needed to keep up with a growing population (which should produce growing demand that businesses would love to be able to meet), and poverty will increase rather than decrease.

Are we heading into another recession?  For more and more Americans, the last one never ended.