by Steven Hansen
In Dr. Michael Pettis Econintersect article - Currency Wars and Trade Woes but China Marches On - he concluded:
So that leaves the U.S. Either it can accept rising trade deficits as it absorbs the employment problems of the rest of the world, or it can move to intervene in trade. I don’t know what it will do, but I am pretty confident that the domestic debate will intensify. One way or the other the crisis in international trade is far from over. In fact the day after I finished this entry the Financial Times, again, had a new headline: “Trade war looming, warns Brazil.”
The burr under my saddle is jobs. I may leave that theme for a time but always return. Trade deficits export jobs. Some think it is only money on balance sheet - but it is jobs that are exported when when a country imports manufactured goods. Follow up:
Some quick facts using unadjusted data:
- Through November 2010 according to U.S. Census, the USA has manufactured $4.55 trillion of goods in 2010.
- Total employment in the manufacturing industry is 11,660,000 according to the BLS. This means that for every $1,000,000 of production in 2010, 2.56 people were employed.
- Through November 2010 according to US Census data, the USA has exported $0.8 trillion of manufactured goods - or 17.5% of manufacturing.
- The total import of manufactured goods through November 2010 is a little more than $1.3 trillion making the manufactured goods trade gap more than $0.5 trillion.
- The manufacturing trade gap of $500,000,000,000 ($0.5 trillion) times 2.56 people per $1 million of manufacturing equals approximately 1.3 million jobs.
I will skip raising the 1.3 million job estimate by using the somewhat controversial jobs multipliers (that in theory means a manufacturing job lost likely causes two addition jobs being lost in the service industry). I will even ignore that it is likely the type of jobs being exported are of higher labor content then the current mix of existing manufacturing jobs. The 1.3 million estimate is likely significantly understated - and the real number is probably in excess of 5 million. That is close to half of the full-time jobs lost in The Great Recession. And this is only for 11 months of one year!!!
Trade is not about money - it is about jobs.
Market Recommendations Made This Week:
An Alternate View on Housing: 2011 May Be Homebuilders' Time to Shine - Recommended a second look at the homebuilder's sector as the backlog should turn positive in 2011. Regardless of viewpoint on growth potential for this sector, the money bleed caused by downsizing will end this year allowing higher profits.
Economic News this Week:
Econintersect economic forecast for January 2010 pointing to a slightly improving economy. This week the Weekly Leading Index (WLI) from ECRI continued to improve from 3.6 to 4.1 implying the business conditions six months from now might be improving. Six months ago, the WLI was negative that December should have been slightly worse then July 2010. This December data has been coming in fairly strong.
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.0 percent in December to 112.4 (2004 = 100). This indicator is also trying to look ahead six months - and has been forecasting six months ahead being better since the end of the Great Recession. Their economists' opinions:
“While the LEI points to an economic expansion that is gaining further traction, its components still suggest the expansion path may be uneven. December’s gain was led by housing permits, the interest rate spread, initial claims for unemployment insurance and consumer expectations. The large increases in December and November show that, after a brief pause in the second quarter of 2010, the LEI is resuming the upward trend that began in March 2009.” .......“The four-month rise suggests the economy now has some wind in its sails; however, it still faces some strong headwinds in the medium-term. Overall economic activity is likely to continue to gain momentum in 2011.”
Initial unemployment claims in this week’s release decreased slightly. Last week's very large not seasonally adjusted number appears to be just a blip as unadjusted claims fell over 200,000 in the current week's data. The DOL seasonal adjustment methodology appears to have made a good call last week.
Most of the data released this week was inconsistent with Econintersect’s December forecast of slow to flat growth - and it more resembles Econintersect's January forecast. Overall most of the December data released this week was strong. However, the transport indicators began their improvement in December which historically foretells economic improvement.
Caveat: one month does not make a trend.
The table below itemizes the major events and analysis this week.
Weekly Economic Release Scorecard:
|Philly Fed Business Survey
||Big jump in new orders and backlog
|Existing Home Sales
||Down YoY, Inventories up YoY, home prices remain relatively flat
|New Residential Construction
||Up 16.7% MoM
||The data is an improvement on terrible
|Oil Shocks and Economic Recessions
||Correlates oil prices to USA recessions
|Empire State Manufacturing Survey
||Still showing manufacturing expanding
|Sea Container Counts
||Up 16% YoY
||Record exports but import's improvements were larger
||Comparing Shadowstat's data to the CPI
|China and the Trade Gap
||Is trade war looming?
|J P Morgan
||Dragons, Haircuts and the Doomsday Machine
||Consumer and small business sentiment remains at or near levels associated with the bottoms of other recent recessions|
|Opinion: Global Economic Chaos 2011
Societies on the edge of socio-economic break-up
||Trying to guess China's direction and policy responses
||Will the seat of the EU leave the Union?
||Cautiously optimistic on the U.S. and global economy|
|Opinion: Federal Reserve
||What would it have been like if the Federal Reserve was not created.
Bankruptcy this week: None