February Trade Deficit Ties Record Set in January

April 7, 2022

At $89.2 billion, the February trade deficit, released by the Commerce Department on Tuesday, tied the record set the previous month. The all-important deficit in manufactured goods was down slightly at $103.4 billion, but not enough from January’s record of $106 billion to avoid being the 2nd worst deficit in manufactured goods ever. Here’s the chart.

In a related piece of news, the March employment report included a tally of which sectors of the economy added workers since the start of the pandemic in February, 2020 and which sectors lost workers. Manufacturing was one of the big losers, shedding 128,000 workers. The biggest loser was leisure and hospitality, down 1.5 million workers. Surprisingly, the next biggest loser was health care, down by 298,000 workers. Manufacturing was the third biggest loser. That’s not a good sign. The trade deficit exploded during the course of the pandemic as government stimulus money fed a healthy appetite for goods. For the manufacturing sector of the U.S. economy to suffer like that is an indication that the long decline in U.S. manufacturing has actually been accelerating during the course of the pandemic, making it obvious that the Biden administration’s talk of a renewed emphasis on manufacturing is a bunch of BS.

The big winners during the pandemic? Professional and business services gained 723,000 jobs during the pandemic. Transportation and warehousing added 608,000 jobs. Retail added 278,000. Construction was flat.

It’s going to be fascinating to see what happens going forward as the federal government continues to run massive budget deficits (driven mostly by the need to offset the drag of the trade deficit) – forcing it to sell huge quantities of bonds – while, at the same time, the Federal Reserve will begin selling off its $6 trillion worth of bonds in an effort to drive up interest rates and slow inflation. It’s hard to see how this ends well. In my opinion, a recession – likely a bad one – is a sure bet.