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Home Publications Blogs Beat the Press Would Anyone at the NYT Notice a Loss of 400,000 Jobs?

Would Anyone at the NYT Notice a Loss of 400,000 Jobs?

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Friday, 04 April 2014 05:13

Just asking, since it seems that the paper missed an unexpected $3 billion rise in the trade deficit in February. This is a big deal for the economy.

On annual basis the February numbers would imply an increase in the deficit of $36 billion, or more than 0.2 percent of GDP. Assuming a multiplier of 1.5, this would reduce GDP by more 0.3 percent, implying a loss of over 400,000 jobs.

Fans of national income accounting know that a trade deficit implies a reduction in demand, it is money that is being spent elsewhere, not in the United States. When the deficit rises, it leads to a fall in output and fewer jobs unless it is offset by larger budget deficits or by increased consumption and investment in the private sector. Since we are not likely to see either, the rise in the trade deficit, if sustained in future months, will mean lower output and fewer jobs. 

(FWIW, the Post noticed.)

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...
written by Larry Signor, April 04, 2014 9:19
It is disconcerting to witness demand rebound in import markets rather than the domestic economy. If $3 billion is impactful, then eliminating the additional $39 billion trade deficit (i.e. a national account balance=0) would imply ~ 3 million jobs if this demand were onshored. With a little imagination one could plausibly root for a positive national account balance (if one were concerned about the unemployed).

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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