Curb Trade Deficit and Rev Up Oil: Opinion

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) -- On Friday the Commerce Department is expected to report that the deficit on international trade in goods and services was $47.8 billion in December, unchanged from November.

This trade deficit is the most significant barrier to more robust economic growth and jobs creation -- even more formidable than the federal budget deficit -- because its effects are more enduring.

The pace of economic recovery has disappointed, because the U.S. economy suffers from too little demand for what Americans make. Consumers are spending again -- the process of winding down consumer debt that followed the Great Recession ended in April. But 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 Creation

Oil and consumer goods from China account for virtually the entire trade gap. The failure of the Bush and Obama administrations to develop and better use abundant domestic petroleum resources and address subsidized Chinese imports are a major barrier to reducing unemployment.

The economy added 243,000 jobs in January, but 361,000 jobs must be added each month for the next 36 months to bring unemployment down to 6%. With federal and state governments cutting payrolls, the private sector must add about 380,000 per month to accomplish this goal. Growth in the range of 4% to 5% a year is needed to accomplish that.

Unemployment has fallen, largely because working-age adults are dropping out of the labor force -- they are neither employed nor seeking work. Since October 2009, the jobless rate has fallen from 10% to 8.3%, even though the percentage of working-age adults employed stayed constant at 58.5%. The percentage of adults participating in the labor force -- the employed and those unemployed but making some effort to find work -- fell from 65.0% to 63.7%.

Simply put, during this recovery, the most effective jobs creation program has been to convince more adults that they don't want a job or that it is futile to look for a decent position, and simply quit looking. This phenomenon has accounted for 75% of the reduction in the unemployment rate over the past 27 months.