It’s Official: Obama’s Trade Policy a Complete Failure

March 8, 2015

Shortly after taking office in 2009, President Obama traveled to Mexico to fulfill a campaign promise to address the failings of NAFTA (the North American Free Trade Agreement).  The trip was a major embarrassment.  Mexico sent him home with his tail between his legs and nothing but new Mexican tariffs to show for his efforts.  (Since then, our trade deficit with Mexico has worsened by 42%.)  In the wake of that spanking, he turned his trade focus to exports, challenging his economic advisors to make America into a Germany-like export powerhouse.  In January of 2010, he vowed to double American exports within five years.

On Friday, the government released the trade figures for January, 2015, so the results are in.  The president’s strategy of focusing on exports instead of imports has been a total failure.  In January of 2010, total U.S. exports were $143.7 billion per month.  Five years later, they have risen to only $189.4 billion – an increase of only 31.8%.  The president has fallen short of his goal by almost $100 billion per month, or $1.2 trillion per year.  As if to punctuate that failure, exports declined in January by $5.6 billion to the same level as December of 2012.  Here’s a chart that graphically displays the extent of this failure:  Obamas Goal to Double Exports.

That’s total exports.  What really counts are exports of manufactured goods, since that’s where jobs are concentrated.  There the news is even worse.  In January of 2010, we exported $86 billion worth of manufactured goods.  Five years later, that figure has risen to only $109.1 billion, an increase of only 26.9%, falling short of the goal by $62.6 billion.  In fact, manufactured exports haven’t risen one bit in almost three years.  Here’s the chart:  Manf’d exports vs. goal.

With this trade strategy, President Obama took the easy way out, preserving his popularity around the G20 punch bowl instead of serving the best interests of American workers.  This trade policy never had a chance of succeeding.  Germany is an export powerhouse because it has America as its trade patsy.  There is no country that would serve as a similar patsy for us.  Exports are determined by foreign demand, over which we have no control whatsoever.  Imports, on the other hand, are completely within our control but, as Obama found out in Mexico, that ruffles some feathers.  He’s had six years to fix our broken trade policy and he’s completely whiffed on what is arguably the most critical issue facing the American economy.  He deserves to go down in history as an utter failure.

Where is the media on this issue?  Will no one hold his feet to the fire on this broken promise?


If the economy is adding so many jobs, where’s the evidence?

March 6, 2015

If there’s one thing that I’ve learned from the two most recent jobs reports (for January and February, the latter released this morning), it’s what a fabrication the report has become, with numbers concocted to fit the administration’s narrative about the strength of the economy.  There’s no better evidence of this than the January jobs report.  If you’ve followed this blog, you may have noticed that I didn’t even comment on the jobs report last month.  That’s because the numbers were preposterous, fabricated to “fit” the Census Bureau’s sudden addition of a million people to our population at the end of 2014 (an adjustment the Census Bureau makes from time to time).  In order to “fit” the new population figure, the January jobs report claimed that the employment level (taken from the household survey) soared by 760,000 in January.  In order to prevent this from making the unemployment rate drop by an unbelievable amount, the jobs report also claimed that over a million people suddenly decided to rejoin the labor force in January when only 600,000 had rejoined the labor force in all of 2014.

Turning to today’s report for February, the establishment survey supposedly showed an addition of 295,000 jobs.  However, the employment level rose by only 96,000.  In spite of that small increase in the employment level, the unemployment rate dropped by two tenths to 5.5%.  Why?  Because the labor force contracted by 178,000.  Come on!  Demographic forces don’t shift so willy-nilly.  If over a million people flooded back into the labor force in January because jobs were becoming so plentiful, then that’s a trend that would have continued into February instead of mysteriously and suddenly reversing to yield a nice decline in unemployment.  And the headline jobs numbers for January and February haven’t been corroborated by ADP, the payroll processing firm, who estimated that job growth slowed in February to 220,000.

If the demand for labor was so strong, then that should translate into wage growth as the supply of labor begins to dwindle.  It hasn’t.  In February, wages rose by only 3 cents to an average of $24.78 per hour.  For “production and non-supervisory employees,” wages didn’t rise at all.  In the past twelve months, wages rose by only 2.0%, barely keeping pace with inflation.  February’s increase is an annual rate of less than 1.5%.

An increase in demand for labor is typically preceded by a growing workweek.  Employers add workers when the workload rises and overtime pay justifies the hiring of additional workers.  There’s no evidence of that happening.  The average workweek has remained flat at 34.6 hours for the past five months.  The manufacturing work week was flat at 41.0 hours and manufacturing overtime actually edged down by o.1 hours.

Nor is this supposed strong job growth supported by other economic data.  Construction spending has been slowing.  Factory orders are declining.  The trade deficit in goods is steadily worsening.  First-time jobless claims have been rising for the past month.  And layoff announcements have begun to rise.

Even the Federal Reserve seems unconvinced by the jobs data, continuing to hold off on interest rate hikes until it sees more solid evidence of job growth, especially in the form of wage growth.

Former Labor Secretary Robert Reich was always an advocate for American workers.  This evening, Labor Secretary Thomas Perez was interviewed by Judy Woodruff on the PBS Newshour.  (http://www.pbs.org/newshour/bb/job-gains-continue-wages-stubbornly-stagnant/)   I was struck by how he came across not as an advocate for American workers, but as a shill for administration policy, actually suggesting that job growth would be stronger if Republicans would only get behind Obama’s immigration policy.  I was eating dinner and nearly choked!

It will be interesting to see how much longer the administration can continue this narrative of strong job growth in the face of other data that tells a completely different story.