(What’s Left of) Our Economy: The New Data Contain More Good Trade News for Trump – & the Economy

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China, economic growth, GDP, goods trade deficit, gross domestic product, Made in Washington trade deficit, manufacturing, merchandise trade deficit, non-oil goods trade deficit, Trade, trade deficit, Trump, {What's Left of) Our Economy

The most reasonable conclusion to draw from today’s new U.S. trade figures (which cover February) is that, although evidence keeps growing that President Trump’s trade policies are returning to a success track, even only a fairly clearcut verdict won’t be possible until the March numbers come in.

The reason? By then, we’ll get at least the preliminary official read on the gross domestic product (GDP) for the first quarter of this year, and that will enable some significant light to be shed on a crucial (but almost completely ignored) measure of the Trump trade record – whether on his watch so far, the economy has been able to break or at least change the relationship between the growth of various measures of the trade deficit on the one hand, and overall economic growth on the other.

The answer matters because most economists have long insisted that an expanding economy and an improving trade balance almost never coexist. That claim is belied by the data, but the belief persists.

Further, good growth accompanied by better trade numbers would be of much more than academic interest. For the weaker the relationship between the worsening of the trade deficit and the growth of the economy, the more American growth would be stemming from domestic production, rather than domestic spending and borrowing, and vice versa.

As of the middle of last year, the economy had shown signs of notable progress along these lines. But in the last few months, as serious Trump tariffs on metals and especially on goods from China came on stream, the data started being distorted by front-running – i.e., importers rushing to procure affected goods before the levies kicked in and their prices rose.

Last month’s trade statistics contained important signs that these effects were ebbing, and the trend continued this month.  (A second distortion, however, is influencing these results – the China business slowdown that takes place each year with the arrival of the spring holiday.) All the same, January’s initially reported 14.61 percent monthly drop in the total trade gap (the biggest such decrease since March) was followed by a 3.43 percent decline in February (and from a January level that was revised down slightly). And at $49.38 billion, the overall trade shortfall was the smallest for a single month since last July’s $51.44 billion.

Meanwhile, the total two-month fall-off in the total trade gap (17.56 percent) was the biggest such decrease since March-May, 2015 (20.50 percent). And this is where we come to the main unknown: How do these instances of trade deficit shrinkage compare with the economy’s overall performance? Although Washington doesn’t track GDP on a monthly basis, it’s worth noting that from the second quarter of 2015 to the third quarter (the period roughly corresponding with that earlier trade deficit narrowing, growth on a pre-inflation annualized basis was 1.40 percent.

What about such growth during the first part of this year? That’s the figure we’ll need to wait for until later this month. At the same time, even then, an even more important question will remain unanswered for a while longer: Can the combination of an improved trade performance and continued growth last? In 2015, it was short-lived. Indeed, the current dollar U.S. economic growth rate in full-year, 2016 (2.44 percent) was less than half of the full-year, 2015 pace (5.07 percent). Unfortunately, the durability of this trend won’t be known for many more months at a minimum.

Nonetheless, there’s an even more rigorous test that the Trump trade policies need to pass – whether they can manage to maintain healthy overall economic growth while encouraging a reduction in that portion of the U.S. trade deficit that’s strongly influenced by trade policy decisions in the first place. As known by RealityChek regulars, that Made in Washington trade deficit strips out oil (because it’s almost never the subject of trade policymaking) and services (because trade liberalization of that activity remains in its infancy). On this front, signs of Trump trade progress haven’t shown up yet.

From January-February, 2017 (a period during which the Trump presidency began) to January-February, 2018, this Made in Washington deficit rose at the considerable pace of 18.47 percent. On the imperfect first-quarter-to-first-quarter basis, pre-inflation GDP was up 4.58 percent. That ratio was actually worse than during former President Barack Obama’s last year in office. Then, GDP expanded by 4.09 percent but the Made in Washington deficit actually dipped – by 0.50 percent.

As with the overall trade deficit, the Obama years sometimes witnessed strong economic growth during which the Made in Washington trade deficit worsened only moderately. For example, between the first quarters of 2011 and 2012, current dollar GDP improved by 4.80 percent and the Made in Washington trade deficit only widened by 9.80 percent. But growth slowed sharply thereafter. The January-February, 2009 to January-February, 2010 period was another time of Made in Washington trade shortfall shrinkage – by 3.13 percent. But GDP climbed by only a weak 2.27 percent.

Between January-February 2018 and January-February 2019, the Made in Washington deficit was up by a modest 2.48 percent. Can respectable growth be maintained? Tune in.

In the meantime, legitimate encouragement from the February trade figures can be drawn from the nature of the improvement. Sequential combined goods and services import growth was just 0.23 percent, while exports rose 1.13 percent – nearly five times faster.

On month, the Made in Washington deficit shrunk by 1.96 percent. That improvement combined with its 10.01 percent sequential drop in January made for the biggest such two-month decrease (11.86 percent) since that March-May period of 2015 (13.36 percent).

Good news came on the China trade front as well. February saw the biggest month-to-month reduction in the chronic, immense U.S. goods deficit with the People’s Republic (28.17 percent) since February, 2017 (36.04 percent). In addition, the resulting two-month decline in this trade gap (32.77 percent) was the biggest such figure since January-March, 2013 (36.16 percent) and the second biggest going all the way back to October-December, 2001 (39.87 percent).

An 18.21 percent surge in American merchandise exports helped (especially since it followed a 22.31 percent monthly plunge). But the 20.21 percent monthly falloff in the much greater amount of goods imports was the biggest contributor – and represented the biggest such decrease since February, 2017 as well, not to mention the second biggest since recessionary February, 2009 (23.84 percent).

February’s manufacturing trade performance was excellent as well – relatively speaking, of course, since the deficit remains enormous in absolute terms (topping $1 trillion last year).

But industry’s trade gap plummeted by 20.02 percent on month in February, as exports rose 1.85 percent and imports sank by 9.14 percent. And the gap shows signs of stabilizing on a year-on-year basis as well, as it’s up a mere 0.37 percent during the first two months of this year compared with the first two months of 2018.

(What’s Left of) Our Economy: More Evidence that the Most Unequal U.S. States are Democratic Party Strongholds

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Democrats, economic growth, income inequality, trickle down economics, {What's Left of) Our Economy

America is well into a new “gilded age,” groans a new study from the Economic Policy Institute (EPI). The overall conclusion: According to the latest available (2015) data, income inequality in the United States (measured by the share of all income held by the top one percent of Americans) has now passed its previous peak – which came in 1928.

But what’s especially interesting about this study mirrors a major finding of previous research on income inequality – the states with the widest rich-poor gaps are those that have voted Democratic lately (including in the last presidential election), and the states where equality is greatest are those that have voted Republican.

According to the EPI report, these are the ten states where the average incomes of the top one percent of income earners exceeded the average incomes of the rest of that state’s income earners by the widest margins (listed in decreasing degree of inequality):

New York

Florida

Connecticut

Nevada

Wyoming

Massachusetts

California

Illinois

New Jersey

Washington

Of the ten, only Florida and Wyoming were carried by President Trump. Moreover, although the District of Columbia is not a state, it is a member of the Electoral College, and cast its vote for Hillary Clinton. It ranked as the eighth most unequal American polity

Here are the states where, by the same gauge, income are the most equal (listed from most equal to least equal):

Alaska

Hawaii

Iowa

West Virginia

Maine

New Mexico

North Dakota

Vermont

Nebraska

Mississippi

Six of these states voted for Mr. Trump, and four for Ms. Clinton. (Maine, with its unusual split system, gave three of its electoral votes to Ms. Clinton and one to Mr. Trump, and was awarded to the Democrats.)

It’s tempting to believe that the states with the highest degrees of inequality are mainly experiencing an unfortunate side effect of strong growth. But of course, that would tend to validate the “trickle down” view of economics that would be embarrassing, to say the least, to blue state electorates that supposedly reject that idea as a fraud. More important, those most unequal states as a group have generated no outsized growth whatever.

Specifically, from the start of the economic recovery (in 2009) through 2015 (the data year on which EPI focuses on), seven of the ten most unequal states grew more slowly, in inflation-adjusted terms, than the nation as a whole. So did the highly unequal District of Columbia. Seven is the exact same number of subpar growers on the list of the ten most equal states

Pointing to the strong correlation between Democratic party leanings and high income inequality by no means proves that the voters and governments of these Democrats-dominated states are hypocrites, and have no interest in narrowing the rich-poor gap they frequently bemoan. But these relationships may support an even more dispiriting conclusion: Despite their avowed interest in the subject and the impressive capacities of many of their state governments to at least mitigate the problem, these electorates and their leaders have no idea how to reduce income inequality.

(What’s Left of) Our Economy: America’s Now Struggling to Sustain Even Unhealthy Growth

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consumption, economic growth, Financial Crisis, personal savings, recession, recovery, savings rate, {What's Left of) Our Economy

Don’t blink! As revealed by government data released yesterday, the U.S. personal savings rate has been vanishing so quickly lately that, before too long, you might miss it entirely. And here’s the kicker to this latest evidence: Although, as I reported on Monday, the American economy is just about as consumption-heavy as during the run-up to the financial crisis, all the resulting spending is now generating growth that’s not only subpar by historical standards, but shockingly weak.

According to the Commerce Department, the savings rate for the last three quarters of national economic activity (through the second quarter of this year) has sunk below four percent of disposable personal income for the first time since the first quarter of 2008. The latest nadir of 3.6 percent was hit in the fourth quarter of last year, and represents the lowest such level since the fourth quarter of 2007 (2.8 percent). If those dates sound familiar, they should. That’s when the last recession officially broke out. As of the second quarter of this year, the rate bounced back a bit to 3.8 percent.

These are a pretty far cry from the worst savings rates in U.S. history. During the previous (bubble) decade, this figure bottomed out at 2.2 percent (in the third quarter of 2005). But the latest numbers are a much further cry from the double-digit levels that were common from the early 1950s through the early 1980s.

After the last recession began, there was some evidence that Americans were learning the lessons of over-spending and socking away more of their incomes. By the second quarter of 2008, the savings rate jumped from 3.7 percent in the first quarter of that year to 5.7 percent. It rose steadily even after the recovery began in the middle of 2009, and actually hit 9.2 percent in the fourth quarter of 2012. Savings didn’t stay nearly that high, but still generally remained well above five percent through the early part of last year. Since then, however, they’ve slid pretty rapidly downhill.

Throughout the recovery, shortsighted economists and other observers actually have bemoaned these signs of consumer caution as unnecessary restraints on economic growth that were preventing the expansion from achieving a satisfactory pace. I disagree, because as I wrote on Monday, the nation needs a sustainable basis for growth, to improve its long-term economic health, even more urgently than it needs faster growth. But what’s especially troubling about the recent drop in the savings rate is that it’s shown no ability to generate what’s seen as respectable growth at all.

In fact, over these last three quarters of weak personal savings rates, the economy grew in real terms by just 1.8 percent, 1.2 percent, and 2.6 percent (the preliminary figure for the second quarter of this year). Those results aren’t even impressive by the low bar set by the current expansion. And they’re positively abysmal when compared with the performance registered between the early 1950s and 1980s, when double-digit savings rates were no obstacle at all to real growth rates of between five and ten percent!

Of course, America’s growth rises and falls for many reasons part from savings and consumption rates. Moreover, the economy of that 1950s-1980s period was very different structurally from today. One example: Military spending played a much bigger economic role during those Cold War decades, and generated abundant production, as well as employment. At the same time, for most of that era, women had not entered the labor market in great numbers, meaning that households generally speaking were living off a single paycheck and benefits package. And still both growth and family incomes were by and large stellar.

The current situation, though, is unmistakably sobering. In recent decades, America has substituted borrowing and spending for saving and producing as its main engines of growth. Now even the unhealthy growth recipe has not only helped trigger a terrifying financial crisis and deep recession. But seven or eight year after those crises were overcome, the spendthrift approach seems close to exhaustion. In sports, those playing a losing game are usually encouraged to change it. How much longer before Americans and their leaders take the hint?

(What’s Left of) Our Economy: America is Still Missing the GDP Goal that Counts

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Barack Obama, economic growth, GDP, Great Recession, housing, personal consumption, recovery, Trump, {What's Left of) Our Economy

Although the economics world has been consumed lately with debating whether President Trump can really boost America’s economic growth rate to three percent (for what it’s worth, the consensus seems to be that he can’t), RealityChek regulars know that this question is beside the point – at best. For as the nation should have learned, considerably faster growth is all too easy to generate. All Washington needs to do is flood the system with cheap credit and thereby inflate spending bubbles.

What really counts is the quality of growth, and by that standard, even the news reported Friday that the inflation-adjusted gross domestic product (GDP) expanded by a seemingly impressive annual rate of 2.54 percent is seriously wanting. For the internals of the GDP release (which included revisions going back to 2014) containing the first estimate of second quarter growth show that this improved performance (final, for now, first quarter growth was only 1.23 percent) depended too heavily on personal consumption – one of the “toxic combination” of GDP components (along with housing) whose outsized surge during the previous decade set the stage for the financial crisis and ensuing Great Recession.

In fact, the second quarter figures showed that, on a standstill basis, the economy has become nearly as consumption- and housing-heavy as during its pre-crisis peak, and that its consumption share has hit a new all-time high. These data also show that the economy is even more distorted in this manner than at the outset of the recession, by which time the housing collapse was in full swing.

That record personal consumption share of real GDP for the second quarter came to 69.60 percent – just slightly higher than the revised first quarter level. By comparison, consumption’s peak pre-crisis share of the economy was only 63.27 percent – in the first quarter of 2007. Three quarters later, as the recession officially began, it had risen to 67.25 percent, again, largely because housing was imploding (and had sunk to 3.91 percent of the after-inflation economy from 4.83 percent in the first quarter).

As for the toxic combination’s share of real GDP, it climbed to 73.10 percent in the second quarter of this year. That’s still short of the record 73.27 percent, from the second quarter of 2005. But it’s not far off. Further, the second quarter figure is a good deal higher than it stood when the last recession started at the end of 2007 (71.16 percent).

As I keep reminding readers, former President Obama stated that the real lesson of the financial crisis and recession was that America needed to create “an economy that’s built to last” – one much less reliant for growth on borrowing and spending, and more reliant on earning and producing. He was right. And the new GDP figures reveal that, some ten years after a generational slump began, macroeconomic progress toward preventing a repeat has been reduced to practically nothing.

(What’s Left of) Our Economy: April’s U.S. Trade Figures Sure Weren’t Winners

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China, economic growth, exports, GDP, Germany, gross domestic product, high tech goods, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, Trade, trade deficit, {What's Left of) Our Economy

Since last Friday was one of those days when both the U.S. jobs figures and trade figures were released the same morning, and since I was traveling that day, I didn’t get a chance to report on the latter as promptly as usual. But that doesn’t mean the trade figures should be overlooked! Here’s a quick rundown of the high- (or low-) lights, which cover the month of April:

>The combined goods and services U.S. trade deficit rose by 5.15 percent on month, from $45.28 billion to $47.62 billion. But for a change, the big news in this total trade shortfall category was in the revision for the March gap – it was upgraded from an initially reported $43.71 billion. That’s a ginormous 3.61 percent.

>Total exports fell sequentially in April by 0.25 percent, from $191.46 billion to $190.98 billion, and total imports increased from $236.74 billion to $238.59 billion, or 0.78 percent.

>And quite naturally, the March revisions were substantial, too. That month’s combined export total was upgraded by 0.25 percent, and the much larger combined import total revised up by 0.87 percent.

>Also disturbing about the new trade figures: They show that for the first four months of this year, the total trade deficit is up by 13.43 percent on a year-to-date basis. That’s more than four times as fast as the total economy grew between the first quarter of last year and the first quarter of this year (4.08 percent – both these figures are in pre-inflation dollars).

>With Germany’s trade policies in the Trump administration’s cross-hairs and therefore in the news, it’s noteworthy that the U.S. merchandise shortfall with Germany grew sequentially by 5.43 percent, to $5.48 billion in April. That’s the highest monthly total since last August’s $6.05 billion.

>U.S. goods imports from Germany fell by 4.11 percent sequentially, but America’s goods exports sank on month by 15.34 percent.

> At the same time, the Germany goods deficit is down by 5.24 percent year-to-date.

>Of America’s other major trade partners, only the merchandise deficit with China increased significantly on month – from $24.58 billion to $27.63 billion, or 12.42 percent.

>U.S. goods exports to China advanced by 2.22 percent, but imports rose by 9.55 percent.

>The U.S. merchandise trade deficit with China is 4.21 percent larger in the first four months of this year than it was the first four months of last year.

>The April manufacturing trade deficit of $70.31 billion was just 0.79 percent higher than March’s $69.76 billion. Manufactures exports were off by 7.91 percent sequentially, while the much greater amount of imports fell by just 4.27 percent.

>Year to date, the manufacturing trade deficit looks set to establish yet another annual record. At $276.12 billion, it’s already running 6.20 percent ahead of last year’s pace.

>For the first four months of this year, manufacturing exports are up by 3.44 percent, but imports are 4.64 percent higher.

>The story is even worse in high tech goods. The trade shortfall actual dipped by 0.49 percent on month in April – from $6.07 to $6.04 billion. Exports were 8.28 percent lower than in March, and imports were off by 7.01 percent.

>Year-to-date, however, the high tech trade gap is up by 36.69 percent – from $18.37 billion to $25.11 billion. Exports have inched up by 0.25 percent, but imports are 5.42 percent higher.

>The U.S. trade deficit in oil fell by a sharp 35.56 percent sequentially in April, from $8.43 billion to $5.43 billion – the lowest monthly total since last September ($5.13 billion).

>But the April non-oil goods deficit of $61.71 billion was 9.22 percent higher than March’s $56.50 billion. It was also the highest monthly total for this shortfall – which is heavily influenced by U.S. trade agreements and other trade policy decisions – since March, 2015’s $61.74 billion (the highest monthly figure in a data series that goes back to 1992).

>Moreover, in real terms, the April non-oil goods deficit climbed 7.62 percent on month, to $62.04 billion. That’s also the highest total since March, 2015’s $62.80 billion (which was another all-time high).

>Since the headline U.S. government data on changes in the gross domestic product (GDP) are adjusted for inflation, this lofty figure for the real non-oil goods deficit indicates that this Made in Washington shortfall’s growth will drag on economic growth in the second quarter of this year.

(What’s Left of) Our Economy: New U.S. GDP Report Shows Slight Trade Deficit Drop but Heavy Growth Drag

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economic growth, exports, GDP, goods, gross domestic product, imports, inflation-adjusted growth, real trade deficii, recession, recovery, services, Trade, trade deficit, {What's Left of) Our Economy

The government’s initial figures for first quarter gross domestic product (GDP) revealed that a slight sequential dip in the U.S. real trade deficit boosted inflation-adjusted growth only fractionally in early 2017. Yet the decline also resulted in the biggest positive sequential swing in trade’s contribution to quarterly growth first quarter (1.89 percentage points) since the fourth quarter of 2010 (1.95 percentage points). Nonetheless, the first quarter’s constant dollar trade deficit ($602.7 billion) was still the second biggest quarterly total since the $623.7 billion run up in the first quarter of 2008, just after the last recession officially began.

These advance first quarter figures show that all of the major categories of after-inflation exports and imports reached new quarterly records, including total goods and services exports ($2.1675 trillion), goods exports ($1.482.8 trillion), services exports ($685.8 billion), total goods and services imports ($2.7703 trillion), goods imports ($2.2797 trillion), and services imports ($488.3 billion). The cumulative growth drag created by the real trade deficit’s increase during the current, historically feeble economic recovery totaled 9.70 percent in the first quarter – down slightly from the 9.71 percent hit in the fourth quarter of 2016. This translates into $239.4 billion in lost real economic expansion. The Made in Washington trade drag – calculated from separate Census figures that isolate trade flows heavily influenced by trade policy – has been much greater. The latest data, which run through the fourth quarter of 2016, reveal it as having reached 21.67 percent, or $532.56 billion in lost growth.

Here are the trade highlights from yesterday morning’s GDP report:

>The government’s first look at first quarter U.S. gross domestic product (GDP) showed that a slight (0.38 percent) sequential dip in the inflation-adjusted trade deficit boosted the period’s modest (0.69 percent annualized) economic growth by a scant 0.07 percentage points.

>At the same time, this marginal lift resulted in the biggest positive quarterly swing in trade’s impact on economic growth (from a 1.82 percentage point reduction to that 0.07 percentage point increase, or a 1.89 percentage point shift) since the last quarter of 2010 – when trade flipped from subtracting 0.83 percentage points from real expansion to adding 1.12 percentage points (a 1.95 percentage point shift).

>The sequential decrease in the real trade deficit, from $605 billion annualized in the fourth quarter to $602.7 billion annualized in the first still left the shortfall at its second highest quarterly level since the first three months of 2008. At that time, just after the last recession officially broke out, the gap hit $623.7 billion.

>All categories of exports and imports tracked in the real GDP figures hit new quarterly records in the first quarter.

>Combined goods and services exports rose on-quarter by 1.41 percent, to $2.1675 trillion annualized. That broke the previous record of $2.1620 trillion annualized, set in the third quarter of last year.

>Goods exports alone increased by 2.01 percent, to $1.4828 trillion annualized – marginally better than the previous record of $1.4792 trillion, also set in third quarter, 2016.

>Services exports inched up by a mere 0.29 percent, to $685.8 billion annualized. That performance bested the old $684 billion record set in the first quarter of 2015.

>Total imports climbed by 1.01 percent, to $2.7703 trillion annualized – their second straight all-time high.

>Goods imports also set a second straight quarterly record, with the first quarter’s $2.2797 billion total annualized besting the fourth quarter’s by 1.10 percent.

>Services imports set their eighth straight quarterly record. The first quarter’s $488.3 billion annualized level was up 0.66 percent from the fourth quarter’s total.

>According to these new GDP figures, the trade drag on the current, historically weak, economic recovery fell slightly on a sequential basis – from 9.71 percent to 9.70 percent. That is, increase in the real trade deficit during the current expansion has reduced its cumulative growth by 239.4 billion.

>Yet the trade drag created by the Made in Washington deficit is now more than twice as great, according to the GDP data and separate figures compiled by the Census Bureau.

>This deficit strips out U.S. trade in oil (which is rarely the subject of trade deals or related policy decisions) and services (where liberalization has made relatively little progress). The growth of the remaining real non-oil goods deficit during the current recovery has slowed cumulative inflation adjusted growth by fully 21.67 percent, or $536.52 billion.

(What’s Left of) Our Economy: Some Real Fake News on Trump and Trade Data

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Canada, data, domestic exports, economic growth, exports, imports, imports for consumption, Jobs, manufacturing, Mexico, NAFTA, North American Free Trade Agreement, Public Citizen, re-exports, The Wall Street Journal, Trade, Trump, {What's Left of) Our Economy

Talk about a non-story. That some globalization cheerleaders have tried to blow up into a scandal. And all because the Trump administration seems to be interested in correcting important distortions in some commonly used U.S. trade data that presents a misleading picture of America’s exports, imports, and trade balances.

Here’s the situation. Last Sunday, The Wall Street Journal reported that  “The Trump administration is considering changing the way it calculates U.S. trade deficits, a shift that would make the country’s trade gap appear larger than it had in past years, according to people involved in the discussions.”

According to the Journal, “The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged….”

Continued the article, “Economists say that approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports.”

So in other words, President Trump and his minions are thinking of artificially deflating the figures describing what the United States sells to the rest of the world, but not making a corresponding change on the import side that would reduce the amount of goods that the nation buys from its trade partners. The result would be a larger U.S. trade deficit, and added ammo for the administration’s claim that America’s trade policy needs major surgery. Talk about creating “alternative facts,” right?

That’s what the Journal‘s editorial board concluded. Charged these trade zealots, the Trump-ers’ “effort to recalculate U.S. trade flows to show larger deficits” is a “trick….borrowed from the political left” that “deserves to be hooted down as an attempt to manipulate statistics to assist bad economic policy [i.e., curbs on trade flows].”

But these allegations aren’t even close to the mark – that is, if you believe the Journal‘s own reporting. For as the original piece eventually reveals (based, as is the entire article, on anonymous sources), the president’s team is indeed mulling making those import data changes, too – which would involve switching the import measure “to ‘imports for consumption,’ a slightly narrower way of measuring imports that would make less of a difference in the overall balance. “

Which means that – weirdly – the Journal reporters decided not to tell those outraged economists that the supposed Trump administration exercise would make statistically valid symmetrical changes, or that these (of course nameless) economists received this info from the reporters and decided to ignore it in order to try to create the appearance of impropriety. It also means that Journal editorial writers either didn’t read their own publication’s coverage all the way through, or chose to ignore that decisive material. Either way, someone has just massively violated their profession’s ethics.

As for the change (reportedly) under consideration itself, it’s entirely justified because those re-exports that under the main system for presenting trade data are counted as real exports literally are not Made in America. As indicated above, they enter the U.S. economy from abroad and then are shipped overseas (or across the border to Canada or Mexico) in nearly all cases entirely or virtually unchanged.

This means that they add virtually nothing to American economic growth or employment – a major and entirely valid reason that exports are so beloved). And although, as some trade advocates claim, their transit into and through the United States creates logistical jobs (in transportation and,warehousing services), such logistical jobs would be created anyway if those goods were domestically produced (Unless you think that such products typically don’t need to be stored after production and then transported to customers, too?)

Moreover, the distortions resulting from sloppy methodology of the main exports numbers are anything but bupkis. Last year, for example, failing to strip out foreign-produced goods boosted total U.S. merchandise exports by 15.43 percent – or $224.33 billion. Relatively speaking, the impact on manufactures exports was even bigger – 17.48 percent, or $223.36 billion.

And the effects on America’s goods exports to Mexico and Canada, its partners in the controversial North American Free Trade Agreement (NAFTA), are especially noteworthy. Proper counting would reduce 2016 U.S. merchandise exports to the former by 23.19 percent and manufactures exports by 25.30 percent. The comparable numbers for Canada are 17.14 percent and 17.93 percent.

Moreover, since proper counting has little effect on import totals, either globally or for NAFTA trade, raising its profile would definitely show higher U.S. deficits. And the export gap has been growing steadily across the board.

Fittingly, this story can be closed on an absurd note, too. As indicated above, the U.S. government already compiles and reports (though in an unsatisfactorily low-profile way), export and import data that quantify exports actually produced in America, and imports actually consumed in America (although, as discussed in this solid Public Citizen analyses, the import numbers could still use some improvement). So a changeover to more accurate figures that reveal trade’s true impact on U.S. production and job creation looks to be pretty easy. Think we’ll be reading about that in The Wall Street Journal?

(What’s Left of) Our Economy: A Super Bowl Lesson About Bubble-ized Growth

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bubbles, economic growth, GDP, gross domestic product, housing, personal consumption, real GDP, recession, Super Bowl, {What's Left of) Our Economy

Super Bowl ads this year have generated an unusual controversy: On-line lending and mortgage giant Quicken Loans is being accused of egging on another housing/consumption bubble – i.e., the same kind of reckless borrowing and spending behavior that helped produce the 2008 financial crisis, and the painful recession and painfully slow recovery that followed.

Watch the ad and judge for yourself whether Quicken is guilty as charged. But also keep in mind that, Quicken or not, bubble territory is exactly where the U.S. economy is heading, at least if the official figures on the gross domestic product (GDP) are accurate. Indeed, by one key measure, the nation, according to GDP figures that take the story through the end of 2015, is now considerably more bubble-ized than at the start of the last recession: Housing and household spending together keep increasingly leading economic growth, and as a result are becoming ever larger shares of the economy.

I’ve repeatedly called these two components of GDP the toxic combination whose excessive growth inflated the last decade’s bubble. At its peak, in 2005, they accounted for 73.09 percent of the U.S. economy after inflation – with housing at 6.13 percent (an all-time record according to government figures that go back to 1999) and personal spending at 66.96 percent (then a post-World War II record).

Housing began crashing soon after, but by the time the recession arrived in the last quarter of 2007, their total share of real GDP still came to 71.40 percent. Through the recession, this figure sank, but it rebounded along with economic growth. By 2013, it was back over 71 percent, and in 2014, hit 71.19 percent.

Last year, the personal spending and housing comeback kicked into another gear. Their combined share of the economy shot up to 71.83 percent – higher than at the onset of the bubble-spurred recession. And their momentum grew throughout the year. Between the first and the fourth quarters, this figure rose from 71.67 percent to 72.17 percent.

High profile push-back against Quicken Loans’ alleged message shows that at least some leading economic voices are aware that America is once again on a low-quality growth path. But concerns expressed by politicians, much less presidential candidates? Their silence remains deafening.

(What’s Left of) Our Economy: 2015 was a Trade Disaster for America

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China, economic growth, exports, GDP, gross domestic product, imports, inflation-adjusted growth, Korea, KORUS, manufacturing, non-oil goods deficit, real GDP, recovery, services trade, Trade, trade deficit, {What's Left of) Our Economy

There were so many revisions to deal with in yesterday’s jobs report that it just wasn’t possible to post on the monthly trade figures that came out at exactly the same time. But don’t get the idea that they’re less important – if only because they add to the full-year, 2015 data that’s now available, and that give us an ever clearer picture of the ongoing economic recovery. The big takeaway from the trade numbers: They deserve much blame for keeping the current expansion historically weak, and American trade policy has been the worst offender.

Here’s what I mean. As I reminded in covering the first full-year 2015 economic growth figures we’ve gotten (which describe the gross domestic product, or GDP), when the nation’s trade balance improves, America’s export and import performance contribute to growth. When it worsens, it subtracts from growth. As a result, the growth of the trade deficit since the current recovery began in mid-2009 has slowed overall economic growth, adjusted for inflation, by 9.59 percent.

Another way to think about it: From the second quarter of 2009, when the recession officially ended, through the fourth quarter of 2015, the economy expanded in real terms by $2.0867 trillion. But had the after-inflation trade deficit simply stayed the same, the nation would have enjoyed just over $200 billion more growth.

Even better, practically all of this new output – and the jobs it would have created – would have come in the private sector. And its creation wouldn’t have required a single dollar of new tax cuts, or a single dollar of extra government spending – none of which is affordable (unless you agree with the idea that the federal government can and should spend whatever it takes to restore growth to acceptable levels).

As for trade policy, it can be identified as a special problem because, as I’ve repeatedly pointed out, the Census Bureau conveniently publishes figures for that (huge) portion of U.S. trade flows that are heavily influenced by trade deals and related decisions. These are exports and imports minus oil (which is always left of out trade agreements) and services (where liberalization has been modest so far).  And Census is even good enough to adjust these numbers for inflation, so they can be studied in the context of the growth figures that are watched most closely.

This real non-oil goods trade has been in deficit for as long as statistics have been collected (since 1994).  And its growth since mid-2009 has reduced total recovery-era growth by more than twice as much in real terms: $418.35 billion. This means that inflation-adjusted expansion would have been a shocking 20.05 percent stronger.

For now, these are the biggest remaining developments revealed by the new trade figures:

>America’s manufacturing sector racked up yet another record trade deficit in 2015, with the $831.40 billion figure shattering 2014’s previous mark of $734.44 billion by 13.20 percent. (These figures are expressed in pre-inflation dollars, not real terms.) It doesn’t take too active an imagination to see the manufacturing deficit move close to the $1 trillion neighborhood this year.

>As noted by most of the economics world, the strong U.S. dollar and weak global growth combined to depress American manufacturing exports. They fell by 6.73 percent in 2015. But even though America’s economy was growing pretty slowly, too, manufactures imports kept rising – by 0.87 percent.

>The manufacturing-heavy U.S. goods trade deficit with China hit a new record in 2015, too. At $365.70 billion, it eclipsed the old mark of $343.08 billion – also set in 2014 – by 6.59 percent. And U.S. merchandise exports to China fell in 2015 for the first time since recessionary 2009. The latest decline, moreover, was twenty times greater than the 2009 decline, even though the Chinese economy continues growing at an official (though probably overstated) near-seven percent annual rate.

>The nearly four-year-old trade agreement between the United States and South Korea (KORUS) has provided the blueprint for President Obama’s negotiators as they developed the Trans-Pacific Partnership (TPP) trade agreement. But the results of the Korea deal shows that the U.S. approach is failing badly. Since it went into effect, in March, 2012, America’s merchandise deficit with South Korea has more than tripled on a monthly basis – from $561.4 million to $1.996 billion.

>On that monthly basis, U.S. goods exports to Korea have plunged by 19.78 percent, while imports are up 12.50 percent.

>Between 2014 and 2015, the American merchandise trade shortfall with Korea increased by 13.09 percent, from $25.05 billion to $28.33 billion. U.S. goods exports to Korea fell by 2.18 percent, but imports rose by 3.32 percent.

>Overall, the combined global U.S. goods and services trade deficit was 4.56 percent higher in 2015 than 2014. The $531.50 billion total was the highest since 2012.

>Combined American exports dropped by 4.82 percent, from $2.343 trillion to $2.230 trillion – the lowest such total since 2012. Imports were off by 3.15 percent – from $2.852 trillion to $2.762 trillion. That still represented their second highest total ever.

>The United States ran an annual surplus in services trade – as it has since 1971. But that surplus declined year-on-year (by 2.45 percent, from $233.14 billion to $227.43 billion) for the first time since 2003.

Much more detailed data is available on the U.S. International Trade Commission website, and I’ll be posting on them in the days to come!

(What’s Left of) Our Economy: More Evidence that Obama’s New Trade Deal is a Recovery Killer

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economic growth, exports, gross domestic product, IMF, imports, Japan, Obama, OECD, recovery, TPP, Trade, Trade Deficits, Trans-Pacific Partnership, {What's Left of) Our Economy

Last month, I posted on new International Monetary Fund (IMF) figures showing that President Obama’s Trans-Pacific Partnership (TPP) trade deal was set to link the United States more tightly with many of the world’s growth laggards. As I’ve often noted, this was highly unlikely at best to benefit America on net, since all else equal, when slow-growing countries trade with faster growers, the latter tend to pull in much more in the way of imports than they generate in exports. Therefore, their trade deficits tend to rise and their own growth takes a hit.

Today, we got more data from another blue chip international source: The Organization for Economic Cooperation and Development (OECD). This grouping of the world’s high income countries released its growth projections for this year and next, and guess what? They point to the same outcome.

The OECD looks at fewer first-round members of the new Pacific Rim trade agreement, but it covers those with by far the biggest economies, including Australia, Canada, Japan, and Mexico (along with New Zealand and Chile). Not that its crystal ball is perfectly translucent, but it’s surely noteworthy that of those seven countries it examines, since its last forecasts came out in June, the OECD has lowered its 2015 and 2016 estimates for all – except the United States. Its economy got a growth upgrade for 2015, but a small downgrade for next year.

As a result, whereas the earlier projections pegged America’s growth as the fifth fastest of the group for both years, now the OECD predicts that the United States will be the growth leader this year, and the fourth fastest grower next year.

Also bad news for TPP supporters like President Obama: The second largest economy in the first round of members after the United States – Japan – is forecast to be by far the slowest grower of the seven. Its annual growth rates are predicted to stay below one percent both years. And since the combination of America’s gross domestic product (62 percent of the TPP total) and Japan’s (20 percent), represents more than four-fifths of the new free trade zone, it’s just gotten harder than ever to portray the new pact as an exciting new engine of U.S. recovery and hiring. Indeed, the data keep sending exactly the opposite message.