On Friday, November 7th, the Labor Department announced the loss of another 240,000 jobs in October. Buried in the announcement was an upward revision of another 179,000 jobs that had been lost in August and September. (Makes you wonder if October’s loss will be revised up to 400,000 next month, doesn’t it?) The running total for the year is now 1.2 million jobs lost.
Not mentioned in these figures is the fact that the labor force grows by about 150,000 per month, due to growth in the overall population. Because of this growth in the labor force, during the January-October time frame, the economy would have needed to add 1.5 million jobs just to hold unemployment steady. So add these 1.5 million new workers to the 1.2 million jobs lost, and you have a shortfall of 2.7 million jobs. That’s about 1.8% of the labor force, which explains the increase in unemployment to 6.5% during the year.
But, of course, that 6.5% unemployment figure is a gross understatement. When 480,000 workers file for first time unemployment benefits every week, an annual rate of 25 million workers, or 17% of the labor force, it makes the official unemployment rate look pretty suspect, doesn’t it?
And it’s all due to the trade deficit. American assets have to be sold off to finance the deficit, the 5% of the economy that we give away for nothing in return. In the ’90s, stocks were the investment of choice for our foreign creditors, fueling a stock market bubble. When that bubble burst, all of those trade dollars had to find a new home. And “home” is exactly where they went. The government saw the housing sector as the next best way to keep those trade dollars coming. Lower lending standards led to a boom in mortgages, which were then repackaged and sold to foreign investors as mortgage backed securities. So the stock market bubble gave way to the housing bubble.
Now our foreign investors are really angry have grown leery of any and all American investments, and the credit needed to keep our debt-addicted economy going has dried up. Still the trade deficit marches on, sapping another $2 billion from our economy every day, and now the government is forced to simply print money to keep the economy going.
Nearly every day, I read reports from around the world of other nations experiencing a trade deficit. Often they are nations who scoff at us on the rare occasion that we express even the slightest concern about our own huge trade deficit. In every case, the articles report alarm among their economists and government leaders. It seems that every nation on earth except the U.S. understands just how damaging a trade deficit can be. When it comes to economics, American economists and leaders may just be the dumbest people on earth.