NCPA - National Center for Policy Analysis

THE TRADE DEFICIT AND JOBS

October 12, 2009

The Wall Street Journal reports that the "U.S. trade deficit unexpectedly narrowed for the first time in four months in August, with exports rising to their highest level of the year and imports easing despite higher oil prices."

Given how trade skeptics often argue that job loss can be ascribed directly to the trade deficit, this might be a good moment to reflect on the relationship between the trade deficit and jobs, says the U.S. Chamber of Commerce:

  • Between 1993 and 2007, the U.S. economy created 26 million new jobs, net; this is one of the greatest job creation booms in American history.
  • During the same period, the trade deficit swelled from 1 percent of gross domestic product to 6 percent of GDP.
  • Since 2007 the trade deficit as a percentage of GDP has fallen by half, to about 3 percent of gross domestic product (GDP) today; but the U.S. economy has shed 6 or 7 million jobs.

Did the growth in the trade deficit create 26 million jobs?  No.

Did the collapse of the trade deficit cause the loss of 6 or 7 million jobs?  No.

But these recent experiences have exploded the simplistic idea that job losses can be blamed on the trade deficit, says the Chamber.

Source: John Murphy, "The Trade Deficit and Jobs," U.S. Chamber of Commerce, October 9, 2009.

For Wall Street Journal text:

http://online.wsj.com/article/SB125509067304175871.html 

 

Browse more articles on Economic Issues