Exhibit A For No Growth

The Bureau of Economic Analysis (BEA) revised Q2 GDP to a 4.07464% continuously compounded annual rate from 4.13987%. More importantly, the BEA provided revised benchmark estimates for corporate profits. The good news is that the benchmark was higher. The bad news is that companies still aren’t making any money. All the revisions applied to long ago years (2008 and 2009 wasn’t as bad as they thought last year).

Corporate profits are Exhibit A for why the economy can’t grow. Can’t, not won’t. Since the 2011 crisis, eurodollar event #2, the one that proved fatal to any chance at monetary therefore economic recovery, corporate profits are up all of 1.3%. Total. Not per year.

The benchmark revisions also reshaped the last eurodollar event, too. They now place the start of the earnings recession in Q4 2014 rather than Q1 2015; more consistent with the “dollar’s” behavior and the economic reaction to it.

Though profitability has rebounded since, it really hasn’t. Profits by this measure are still slightly less than the re-dated prior peak.

Circumstances are only marginally better in other profit series, which is to say they agree on the overall situation if differ as to the degree of sheer economic degradation. Profits from Current Production, for example, have risen by nearly 11% since the start of 2012 as compared to the other series’ 1.3% gain. It’s a difference of 1.6% per year versus 0.2%. I doubt corporate boardrooms see that as meaningful.

The symptoms of this dysfunction are obvious. Companies that can’t grow on the bottom line are going to overmanage their cost structures. Throw in lingering skittishness about liquidity and they just aren’t going to be enthusiastic about taking on further cash flow liabilities; those like paying a lot for additional labor that doesn’t appear to be necessary.

Companies can’t make any money because the economy isn’t growing, and the economy can’t grow because companies can’t make any money. It only seems like a chicken and egg problem from the perspective of QE and the current orthodoxy of central bankers.