Trade deficit for 2004 reaches all-time high
The U.S. trade deficit narrowed in December but was still the second-highest monthly figure ever.
The Washington Post
WASHINGTON — The U.S. trade deficit narrowed in December but was still the second-highest monthly figure ever. And it lifted the deficit for 2004 to $617.7 billion — a record that surpassed the previous all-time high, set in 2003, by nearly one-quarter.
The trade report, issued yesterday by the Commerce Department, capped a year in which the voracious appetite of Americans for imported goods drove the deficit to proportions no major industrial country has reached — 5.3 percent of gross domestic product, up from 4.5 percent the year before. The widening gap has deepened worries that the United States is growing dangerously dependent on the capital lent by foreigners to offset the cost of the products they sell to Americans.
While broad trade numbers may seem divorced from day-to-day lives, they have a direct effect on jobs. The U.S. can lose jobs by importing more goods than it sells abroad, because production that would have hired workers in the U.S. moves offshore and the goods become imports, contributing to the U.S. trade deficit.
Job loss to China has been particularly pronounced and is accelerating because of rapid growth in China's share of the U.S. trade balance.
Since 1997, Washington and Oregon combined have lost production that supported 23,533 jobs as a result of the trade deficit with China, according to a recent study by the Economic Policy Institute (EPI), a Washington, D.C.-based think tank. That compares with 13,389 jobs lost between 1989 and 1997, EPI said.
Most of the job loss was in manufacturing. But the fastest-growing sectors for job loss are in high-tech industries, according to the study.
The narrowing of the December deficit, to $56.4 billion from a revised record of $59.3 billion in November, offered a glimmer of hope that the relentless upward surge in the gap might abate in coming months. Federal Reserve Board chairman Alan Greenspan predicted last week that the deficit may soon start leveling off and possibly even shrink, citing the fall in the dollar against other currencies, which makes U.S.-made goods more competitive against products made abroad.
But yesterday's report offered fresh data about why a turnaround will be so difficult, because imports increased nearly twice as much as exports last year. That is the opposite of what must happen for the deficit to narrow. Since the $1.764 trillion that the United States imported last year is so much greater than the $1.146 trillion that it shipped abroad, exports must grow much faster than imports to close the gap.
"The U.S. trade deficit narrowed sharply, but let's not get carried away," said Joel Naroff of Naroff Economic Advisors. "The level is still the second highest we have ever recorded. ... The deficit is still way too wide."
Much of the narrowing in the December deficit stemmed from a drop in the value of petroleum imports that was attributable to an 11 percent fall in petroleum prices. Imports of other goods rose, raising the nation's total import bill by 0.1 percent, to $156.6 billion.
By far the brightest spot in the report was a $3.1 billion increase in exports, to $100.2 billion, with the boost spread widely among capital goods, industrial supplies and consumer products. That result reinforced the optimism of analysts who believe the falling dollar will help spur shipments of U.S. goods overseas.
Separately, the number of Americans filing new claims for unemployment benefits totaled 303,000 last week, a decline of 13,000 from the previous week, according to the Labor Department.
It put new filings at their lowest level since October 2000 and underscored that the labor market is continuing to show strength.
Seattle Times business reporter Alwyn Scott provided information about the deficit's effect on jobs. The Associated Press provided information on the unemployment benefits report.