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Statement
Regarding Employment Report and Trade Deficits
Today the
Labor Department reported that 227,000 new jobs were added in February,
representing the third consecutive month of job creation. Many observers have
taken the report as clear evidence that the economic recovery has taken hold
in earnest. However a second data set, also issued today, throws significant
amounts of cold water on that assumption.
The Commerce
Department reported that, after surging for much of the last year, the U.S.
trade deficit expanded by $4.3 billion in January to $52.6 billion. This is
the largest monthly trade gap since October 2008, and it comes with record
imports. So in terms of trade, the U.S. is in exactly the same position we
were during the opening act of the financial crisis.
While it
may be true that we are adding jobs, it is also true that we are not adding
the kinds of jobs that will put us on a sustainable path. Large and
persistent trade deficits were a primary reason that the U.S. economy
imploded in the first place. If we fail to build an economy that can pay for
imports with an equal number of exports, we will simply revisit the pain of
last few years.
Despite
some marginal improvement in manufacturing employment, new hires have been
overwhelmingly in the service sector. We need a shrinking service sector and
a shrinking trade deficit. As it is, newly employed Americans are spending
money on imported products that America should be producing. The trade
figures are evidence that our spending has increased while our economy has
not. It is also shocking to consider that we are importing more with 8.3%
unemployment than we were five years ago when unemployment was near 5%. I can
only imagine how large the deficit would be if we had even more service
sector jobs.
Job
creation at home has been like vegetation sprouting along the banks of the
rivers of stimulus money. These artificial pathways may help temporarily, but
they can only be sustained while the stimulus continues. All the while,
however, they prevent growth where it is needed most. The recession should
have forced us to address the problem of persistent and enormous trade
deficits. We have utterly failed to do this. So while the job numbers look
good for now, there should be thin confidence that the pattern is
sustainable.
Peter Schiff is CEO
of Euro Pacific Precious Metals, a gold and silver dealer selling reputable,
well-known bullion coins and bars at competitive prices. To learn more,
please visit www.europacmetals.com or call (888) GOLD-160.
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