The economy made an intrusion into the news this morning, breaking the focus of late on foreign affairs, with some bad news on the manufacturing front.  The New York Federal Reserve manufacturing index dropped to its lowest level since the recession ended, surprising economists and signaling a further slowdown in both factory orders and employment:

Factory activity in New York state contracted for a second month in a row in September, falling to its lowest level in nearly 3-1/2 years as new orders shrank further, a report from the New York Federal Reserve showed on Monday.

The New York Fed’s “Empire State” general business conditions index dropped to minus 10.41, from minus 5.85 in August, frustrating economists’ forecasts for an improvement to minus 2, according to a Reuters poll. It was the lowest level since April 2009.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. The sector contracted in August for the first time in 10 months.

With orders plummeting, the impact on the labor force is predictable:

Employment gauges deteriorated. The index for the number of employees fell to 4.26 from 16.47 and the average employee workweek index slipped to minus 1.06 from 3.53.

The New York Times reports that corporate earnings are expected to falter in this quarter as well:

Giants like FedEx and Intel, two bellwethers of the global economy, are warning of lower quarterly profits because of weakness in worldwide demand. Overseas companies are feeling the pinch, too. Burberry, the British luxury retailer which had seemed immune to a slowdown, is offering a similar warning.

Even smaller, family-owned companies like Eastman Machine in Buffalo, which makes cutting equipment for the textile industry, are wary. “We feel like we are walking on a tightrope,” said Robert Stevenson, Eastman Machine’s chief executive.

In all, Wall Street expects quarterly profits at the typical large American company to decline for the first time since 2009.

In part, this is due to global demand falling off.  It’s also due in no small part to a lack of dynamism at home.  The normal cycle of entrepreneurship has been disrupted by an avalanche of regulation and massive ambiguity on taxes and further regulation.  Instead of anticipating demand and investing in it, businesses won’t innovate and invest until demand already exists — a straitjacket for economic expansion.  Supporters of Obamanomics have long griped that corporate profits have skyrocketed under Barack Obama, but that’s at least partly due to their inability to price risk and put capital into play in any kind of rational manner.  The Cash for Clunkers nature of Obamanomics, with its short-term gimmickry and long-term regulatory opacity, makes that impossible.

These two indicators point to very bleak third and fourth quarters in the US.  We’re heading back into recessionary numbers, and we still have Taxmageddon ahead of us.