Trade Deficit Stunts Growth, Job Creation
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.
NEW YORK (TheStreet) -- The Commerce Department is expected to report on Friday that the deficit on international trade in goods and services was $45.0 billion in November, up slightly from $43.5 billion in October.
This trade deficit is the most significant barrier to jobs creation and growth in the U.S. economy. It's even more formidable than the federal budget deficit, because its effects are more enduring.
The economic recovery is slow, because the U.S. economy suffers from too little demand for what Americans make. Americans are spending again -- the process of winding down consumer debt that followed the Great Recession ended in April. However, every dollar that goes abroad to purchase oil or Chinese consumer goods, and does not return to purchase U.S. exports, is lost domestic demand that could be creating American jobs.
Jobs CreationOil and Chinese imports account for virtually the entire trade gap. The failure of the Bush and Obama administrations to develop abundant domestic oil and gas resources, and address subsidized Chinese imports are major barriers to reducing unemployment.
Economic GrowthFor 2011, GDP growth averaged about 2%, but 3% is needed just to keep up with productivity and labor force growth and keep unemployment from rising. Fourth-quarter growth was about 3% --compensating for more sluggish progress earlier in the year -- but overall economists expect the pace to again slow to 2% to 2.5% in 2012. In 2011, consumer spending, business investment and auto sales added significantly to demand and growth, and exports did better too; however, higher prices for oil and subsidized Chinese manufactures into U.S. markets pushed up the trade deficit and substantially offset those positive trends. Now conditions in Europe and rising consumer debt will curb demand at least through the spring and summer.
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