Moving Closer and Closer to a U.S. Recession

The National Association for Business Economics (NABE) is a professional organization for business economics that, among other things, conducts surveys of its corporate members.

When its members include large American corporations, one tends to pay attention to its Industry Survey, which is conducted quarterly. The latest survey, conducted in June 2012, reflects deteriorating economic conditions, according to the NABE; translated, this means we could be headed into a recession.

The highlights include the lack of future jobs growth. In the previous survey, 48% of the corporations surveyed said they were going to maintain their employees but not hire anyone else: that means no jobs growth.

In June 2012, 62% of corporations said they were going to maintain the status quo when it came to employment: no jobs growth. This is the lowest reading in over a year! This certainly adds to the credence of a recession brewing, which will not help jobs growth.

Only 39% of respondents expected rising sales at their businesses over the next six months. This was in contrast to the previous reading of 60% and was, once more, the lowest reading in over a year!

Again, with no increase in sales, there can be little jobs growth and certainly these survey results are reflective of a recession and not recovery.

The corporations surveyed now expect GDP growth to come in lower than they expected in 2012, with the average around the two-percent area, which is why the U.S. has experienced no jobs growth.

Here at Profit Confidential, our analysts believe U.S. GDP growth in the third quarter will be below 1.5%, as low jobs growth translates into no income growth and no retail sales.

Due to this pessimism, the NABE survey suggests that no large capital investment projects are going to be initiated in the next six months. This will further prevent jobs growth, and it is reflective of a recessionary environment and not an economic recovery.

I’ve talked often in these pages about what is now being referred to as the “fiscal cliff” in Congress—the repeal of the Bush-era tax cuts and a halt to government spending initiatives instituted at the onset of the recession in 2008 that are set to expire on January 1, 2013.

I have been saying that a portion or combination of these tax cuts and government spending initiatives will be extended or the U.S. will certainly face recession and no jobs growth.

Sixty-five percent of businesses stated that should the fiscal cliff occur, it will impact their sales in 2013 negatively. (See: “America’s ‘Small Business’ Catastrophe.”)

Large and small businesses in this country admit that they will not contribute to jobs growth and keep talking about how sales are falling and how they will not invest in capital projects. This is recession talk. Early this year, I started talking about a recession in America happening in late 2012, early 2013. Each passing day, my prediction gains more certainty.

Where the Market Stands; Where it’s Headed:

We might as well have called today’s issue the “Recession” issue.

Early on this year, Profit Confidential started saying we would enter a recession in 2012, early 2013. Now talk of this is everywhere. Yesterday, Bill Gross, who runs the world’s largest mutual fund, weighed in and said he thought the U.S. was entering a recession. Gross’ name can be added to a slew of others who now have the same opinion.

Unless you own special situation stocks you feel will rise in price, the remaining lifespan for the bear market rally in stocks that started in March of 2009 is very, very limited.

What He Said:

“Why Google stock will go higher: Most investors in Google, surprisingly, are retail investors. And that’s why the stock can go higher—because only 20% of the stock is owned by institutions. If the institutions jump in and buy Google, the stock will certainly move higher.” Michael Lombardi in Profit Confidential, June 2, 2005. Michael recommended Google stock as a buy on June 2, 2005, when the stock was trading at $288.00. On November 5, 2007, when Google reached $700.00 U.S. per share, Michael advised his readers to sell their Google stock and to put the proceeds into gold-related investments. Coincidently, gold bullion was also trading at about $700.00 per ounce in November 2007. Michael’s message was to trade each $700.00 share of Google into $700.00 of gold, because he saw gold as a much better investment.