The U.S. trade deficit took an unexpectedly large turn for the worse in December, loading more foreign debt onto Americans and lengthening the odds against President Barack Obama’s effort to spark job growth by sharply boosting exports.
The Commerce Department report Wednesday, recording the third straight month of rising trade deficits, showed that exports continued to rebound at a solid pace in the final weeks of 2009, but a surge in oil imports wiped out the gain, leaving the country’s trade balance $40.2 billion in the red. That was up sharply from the $36.4 billion shortfall in November 2009.
While trade balance reports attract relatively little public attention — and the country has run deficits every year since 1976 — the long-term effect of buying more goods from other countries than those countries buy from the United States is having a significant impact on Main Street. And for most Americans, the effect is not positive.
Indeed, the higher trade deficit, along with new data on business inventories, means the 5.7 percent growth rate reported for the U.S. economy as a whole in the fourth quarter of 2009 could now be revised down closer to 5 percent, said Mark Zandi, chief economist at Moody’s Economy.com.
The story behind December’s sudden jump in petroleum imports reflected just how difficult the problem has become: The reason the country consumed so much more foreign oil in December was that the economy had begun to pull out of the worst recession in a half century. The increased imports came from buying more petroleum, not from higher prices.
Because of the continuing dependence on imported oil and low-cost goods made from China and elsewhere, the fragile economic recovery actually sucked money out of the United States and sent it abroad — which in turn makes it harder to generate new jobs and reduce unemployment.
In one example, the trade deficit in cars and auto parts ran $1.2 trillion over the last decade. During that period, U.S. auto manufacturing lost about half of its jobs, or some 667,000, said Charles McMillion, president of MBG Information Services, a Washington economic research firm.
“If you import it rather than making it here, you’re out jobs,” he said.
In a bid to recover the millions of jobs lost during the recession, as well as his political standing among the electorate, Obama pledged in his State of the Union address last month to focus on rebuilding the economy with trade as a key part of his strategy. He set a goal of doubling exports in five years, a target most analysts say is laudable but probably not achievable.
Yet what really matters for the economy — and job creation — is narrowing the trade deficit. And that will require U.S. exports to grow at a significantly faster pace than imports because Americans have long been consuming much more than they been producing. And the difference has been made up with funds borrowed from global investors or the sale of American assets.
Experts see some promising signs. For all of 2009, the Commerce Department said, the U.S. deficit in goods and services totaled $381 billion — down dramatically from the $696 billion deficit in 2008 and half of the record $760 billion gap in 2006.
The sharply lower deficit last year mirrored the depth of the global recession and plunging demand in the United States. American exports last year fell 15 percent from 2008 levels, but imports sank at a faster rate of 23 percent.
Even the politically sensitive trade deficit in goods with China narrowed last year, to a four-year low of $227 billion from $268 billion in 2008.
In California, where economists track exports as a gauge of economic well-being given the state’s big ports and large international trade industry, December merchandise exports rose to $11.6 billion, up 12 percent increase from the same month in 2008, according to a University of California Center Sacramento analysis of Commerce Department data.
“We can be encouraged by U.S. exports of goods and services increasing in December for an eighth consecutive month,” Commerce Secretary Gary Locke said.
The increase in exports has been fueled by the beginnings of a global recovery and a weak U.S. dollar, which makes American products cheaper in overseas markets. Looking to keep the momentum going, Locke said the president has proposed tens of millions of additional funds to promote exports and help businesses break into foreign markets, particularly small firms.
Less than 1 percent of the 30 million businesses in the U.S. currently sell goods abroad, Locke said.
But even spending $100 million more on trade fairs and other activities designed to teach American companies how to promote and sell their products overseas may not boost exports much.
“That is a drop in the bucket for the number of entrepreneurs we have,” said John Husing, chief analyst at Economics & Politics Inc., a research firm that focuses on Riverside and San Bernardino counties in Southern California, a transportation and distribution hub for foreign goods.
By Don Lee – timesargus.com
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