October Rise in Manufactured Exports Hints at What’s Possible with a Change in Trade Policy

December 6, 2014


Exports of U.S. manufactured goods rose by $3.5 billion in November to a record level of $115.4 billion.  Unfortunately, imports of manufactured goods offset much of that increase, rising $1.8 billion.  That, coupled with a $1.4 billion decline in petroleum exports, left the trade deficit for November nearly flat at $43.4 billion.  That’s worse than expectations and will drag on 4th quarter GDP.

Still, it’s interesting that this report came on the same day as the announcement that the economy added 321,000 jobs in November, including 28,000 jobs in manufacturing – the first decent increase in many months.  This is just a tiny taste of what would happen to our economy if we got our trade policy right and restored a balance of trade.  If a $3.5 billion boost in manufactured exports has this kind of effect, imagine the impact that a $50 billion improvement would have (the amount it’d take to restore a balance of trade in manufactured goods).

Unfortunately, this November number is clearly just a tiny upward blip in the steep downward trend in manufacturing in the U.S.  Look at this chart of our balance of trade in manufactured goods and tell me that November is evidence of some sort of rebound:  Manf’d Goods Balance of Trade.

By the way, the November increase in manufactured exports still leaves us $50.4 billion short of Obama’ goal to double exports by January of ’15.  In other words, if the president had actually taken any action on trade policy to make it happen, our economy would now be enjoying the kind of explosive rebound that I suggested above that you could only imagine.



Some Perspective on the November Employment Report

December 5, 2014


Last month there was a huge increase in the “employment level” reported in the household survey, an increase of 683,000, resulting in a 0.2% drop in unemployment.  This month, as reported this morning by the Bureau of Labor Statistics, the establishment survey found that the economy added 321,000 jobs – a big surprise, given that payroll processing firm ADP reported Wednesday that the economy only added a disappointing 208,000 jobs in November.  (By the way, although unemployment reportedly held steady at 5.8% in November, no one took note of the fact that it actually rose slightly.  Why?  Because the employment level barely rose at all in November, up by only 4,000.  Only rounding made unemployment appear to be unchanged.)

It’s impossible to draw any conclusions from these wild swings, so let’s look at how the employment situation has changed over the past six months.  Here’s what’s happened since May:

  • The economy has added 1,548,000 jobs – an average of 259,000 per month.  (Establishment survey data)
  • The employment level has risen by 1,493,000 – an average gain of 249,000 per month.  (Household survey data)
  • The U.S. population has risen by 1,210,000.
  • The labor force has grown by 784,000.  (According to the household survey.)
  • U3 unemployment has fallen from 6.3% t 5.8% (though it actually rose by almost  0.1% in November).
  • A more accurate gauge of unemployment – one that holds the labor force as a constant percentage of the population – has fallen from 9.8% to 9.2% – still a very high number by historical standards.
  • Per capita employment has risen from 45.8% to 46.1% – still well off the pre-recession level of nearly 49%.

No doubt about it, the economy has been improving since the dismal first quarter of this year.  But the fact that inflation-adjusted incomes continue to remain flat or are even declining (depending on income level) continues to cast doubt on the quality of jobs reported and just how robust the economy really is.  Read the “household survey data” of the above-linked November report and you’re struck by one or two words that are used over and over:  “little changed” and “unchanged” – even over the course of the entire previous year.  With the rest of the world on the brink of recession, can we really be doing that well?  Time will tell.  Let’s see what happens after the holiday season.