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Rising Trade Deficit Slows Jobs Recovery

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.

NEW YORK (TheStreet) - The deficit on international trade in goods and services was $40.6 billion in December, up from $38.3 billion in November and $27.1 billion in mid 2009, when the economic recovery began, the Commerce Department reported Friday.

This rising deficit subtracts from demand for U.S. goods and services, just as stimulus spending and additional temporary tax cuts add to it. The deficit is slowing the recovery and jobs creation, and the Obama Administration and Republicans in Congress have not offered a credible policy to significantly change it.

Jobs Creation

The economy added 36,000 jobs in January, and that was particularly disappointing after surges in holiday retail sales, business spending and auto sales.

Americans have returned to the malls and new car showrooms but too many dollars consumers spend go abroad to purchase imports but don't return to buy U.S. exports. This leaves too many Americans jobless and wages stagnant, and the resulting slow growth leaves state and municipal governments with chronic budget woes.

By January, 2014, the private sector must add more than 13 million jobs to bring unemployment down to 6 percent. Current policies are not creating conditions for 5 percent GDP growth that could be achieved and is necessary for businesses to hire 370,000 workers each month.

Since December, 2009, the private sector has added 92,000 jobs per month, but most of those have been in government-subsidized health care and social services, and temporary business services. Netting those out, core private sector jobs creation has been a meager 42,000 per month. That comes to less than 14 permanent, non-government subsidized jobs per county for more than 5000 job seekers per county.

During the early stages of an economic expansion, temporary jobs appear first, but 19 months into the recovery, permanent, non-government subsidized jobs creation should accelerate. Instead, core private sector jobs were up only 43,000 in January, down from 73,000 in the fourth quarter.

Economic Growth

Commerce Department preliminary estimates indicate GDP growth was only 3.2 percent, significantly disappointing Wall Street economists.

Consumer spending, business technology and auto sales all added strongly to demand and growth, and exports actually outpaced imports for the first time in a year. Pessimism, caused by rising gasoline prices, health care reform, and import competition caused businesses to run down inventories rather than add new capacity and employees.

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