| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

Analysis/Comment Last Updated: Jun 9, 2011 - 9:03 AM


Dr. Peter Morici: US trade deficit slows recovery, jobs creation
By Professor Peter Morici
Jun 9, 2011 - 1:32 AM

Email this article
 Printer friendly page

Dr. Peter Morici: On Thursday, the US Commerce Department is expected to report the deficit on international trade in goods and services was $49.0bn in April, up from $48.2bn in March. Oil and trade with China account for virtually the entire shortfall, and are a major drag on economic recovery and threat to President Obama’s re-election.

This trade deficit subtracts from demand for US-made goods and services, just as a large federal budget deficit adds to it. Consequently, a rising trade deficit slows growth and jobs creation, and limits how much the Congress and the President may reduce the budget deficit without sinking the economic recovery.

Jobs Creation

The failures to develop domestic petroleum resources and address subsidized Chinese imports are major barriers to creating enough jobs to pull unemployment down to acceptable levels over the next several years.

The economy added only 54,000 jobs in May; however, 365,000 jobs must be added each month for the next 36 months to bring unemployment down to 6%. With federal and state governments trimming civil servants, private sector jobs growth must be about 390,000 per month to accomplish this goal.

Americans are spending again, but too many dollars go abroad to purchase Middle East oil and Chinese consumer goods that do not return to buy US exports. This leaves US businesses with too little demand to justify new investments and hiring, too many Americans jobless and wages stagnant, and state and municipal governments with chronic budget woes.

In May, the private sector has added only 83,000 jobs, and many were in government subsidized health care and social services. Netting those out, core private sector jobs have increased only 57,000 in May - - that comes to 18 non-government subsidized jobs per city and county.

Early in a recovery, temporary jobs appear first, but 23 months into the expansion, permanent, non-government subsidized jobs creation should be much stronger.

Economic Growth

Since the recovery began in mid 2009, GDP growth has averaged 2.8%, disappointing Administration economists who have consistently assumed 4% growth in budget projections and forecasts for the job creating effects of stimulus spending. And now economists are concerned that growth is slowing further—to well below the 3% needed just to keep pace with labor force growth and keep unemployment from rising.

Through the beginning of this year, consumer spending, business technology and auto sales have added strongly to demand and growth, and exports have done quite well. However, soaring oil prices and the continued push of subsidized Chinese manufactures into US markets offset those positive trends. Now consumer pessimism is pushing down home prices and sales again, and car sales have dipped in recent weeks.

Administration imposed regulatory limits on conventional oil and gas development are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. In combination, Administration energy policies are pushing up the cost of driving and making the United States even more dependent on imported oil and indebted to China and other overseas creditors to pay for it.

To keep Chinese products artificially inexpensive on US store shelves, Beijing undervalues the yuan by 40%. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign exchange markets.

Presidents Bush and Obama have sought to alter Chinese policies through negotiations, but Beijing offers only token gestures and cultivates political support among US multinationals producing in China and large banks seeking additional business in China.

The United States should impose a tax on dollar-yuan conversions in an amount equal to China’s currency market intervention divided by its exports—about 35%. That would neutralize China’s currency subsidies that steal US factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it’s self defense.

Peter Morici,

Professor, Robert H. Smith School of Business, University of Maryland,

College Park, MD 20742-1815,

703 549 4338 Phone

703 618 4338 Cell Phone

pmorici@rhsmith.umd.edu

http://www.smith.umd.edu/lbpp/faculty/morici.html

http://www.smith.umd.edu/faculty/pmorici/cv_pmorici.htm

Related Articles


© Copyright 2011 by Finfacts.com

Top of Page

Analysis/Comment
Latest Headlines
Celtic Tiger RIP: Change in conservative Ireland six years after crash
Dr Peter Morici: Five things to know about the Fed’s obsession with inflation
In age of acronym/ Google, Trinity to rebrand as 'Trinity College, the University of Dublin’
Hoeness case part of ‘painful’ change for Swiss bankers
Dr Peter Morici: The Cold War was only on vacation
Dr Peter Morici: US economy drags on Obama's approval ratings; Don’t look for changes in Washington
Dr Peter Morici: Bitcoin debacle shatters the myth of virtual money
Dr Peter Morici: US Tax Reform: Eliminate the income tax and IRS altogether
Wealth threatens the simple life in Gstaad, Switzerland
Irish journalists get cash payouts over 'homophobic' defamation claim
Irish academics get lavish pension top-ups as private pensions struggle
Dr Peter Morici: Inequality is President Obama’s highest priority, but solutions are naive
The Finfacts Troika: Better times ahead and a hangover to forget?
Dr Peter Morici: Volcker Rule arrives with the hidden jewel in Dodd-Frank financial reforms
Ireland's toothless fiscal watchdog threatens to bark
Analysis: Germany's current account surplus - - Part 2
The end of western affluence?
Bono's hypocrisy on Africa, corporate tax avoidance in Ireland
France like Ireland is run for the benefit of the old
Why should Europe expect ever rising standards of living?
Dr Peter Morici: Today's US jobs report
Famous speeches and their impact from Pericles to Hillary Clinton
Dr Peter Morici: Modest US jobs creation amid sluggish growth
Surveying the wreckage of torpedoed Swiss-US tax deal
Europe’s Depression: Abandoning euro/ deficit spending in Germany only way out
Dr. Peter Morici: Fed actions and Friday's job's report
Dr Peter Morici: Deceptively strong US GDP report expected
Dr Peter Morici: Trade pacts with Europe and Japan will boost US unemployment
Dr Peter Morici: Modest US jobs growth expected to continue
Dr Peter Morici: Easter; A time for optimism and some Yankee pragmatism
Dr Peter Morici: Ryan’s health solutions show why Republicans can’t win elections
Dr. Peter Morici: As Dow sets record, stronger growth needed to sustain bull market
Dr Peter Morici: Bringing facts to the US budget debate
Dr Peter Morici: Uncle Sam’s “F” rated bonds
Dr Peter Morici: US Economy; Self-inflicted wounds threaten jobs market meltdown
Dr Peter Morici: US December jobs forecast to have risen 155,000; Budget deal to boost unemployment
Surprise! The world did not end on December 21, 2012; Mayans were not the stupid ones
Dr Peter Morici: Slower growth, stubborn unemployment, faces US in 2013
Dr Peter Morici: The “fiscal cliff” and solving US budget woes
Dr Peter Morici: Economists forecast that US economy added 113,000 jobs in September