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Job Growth Slowing as Trade Deficit Hits 10-year High

Updated : June 12th, 2019

The drop in soybean exports and the record high increase in imports of consumer goods has created a US trade deficit which is at a 10-year high. This would mean that the Trump administration’s tariff-related measures to reduce the trade gap have been ineffective.

New data suggests that private employers hired fewer workers than expected in November and this points to the moderation in the pace of the job growth. This was reinforced by yet another report that showed a decline in the number of Americans filing claims for unemployment benefits.

Trade deficit affects job growth

The report maintains that weak housing and business spending on equipment data signals a slowdown in economic growth. There have been concerns over the health of the economy that has upset the financial markets in the last few days.

Increase in Trade Deficit

Also, the Commerce Department suggested that the trade deficit has increased by 1.7% to $55.5 billion, the highest its ever been since October 2008. This trade gap has widened for 5 straight months. Revised data show that there is a deficit rising to $54.6 billion instead of the previously reported $54 billion.

Similarly, the politically sensitive goods trade deficit with China has surged 7.1% to record $43.1 billion in October. There is a bitter trade war which is brewing between the United States and China. There are imposed tariffs on $250 billion worth of Chinese imports to force concession on the list of demands that would change the terms of trade between the two countries.

Sino-American Trade War

China has now created new import tariffs on US goods in response. President Trump accuses Beijing of not playing fairly on trade. Additionally, to the Chinese goods, Washington was slapped with tariffs on steel and aluminum imports into the United States. While President Trump and President Xi Jinping agreed to hold off on imposing more tariffs for 90 days while they negotiate a deal to end this trade dispute.

After the arrest of Meng Wanzhou, CFO of Huawei Technologies and the daughter of its founder, this truce seems to be in jeopardy.

The overall trade deficit is forecast to rise to $55 billion in October. When it is adjusted for inflation, the good trade deficit was increased to $87.9 billion in October from $87.2 billion in September. This so-called real trade deficit above the average for the third quarter.

Trade, Stocks, and Exports

Trade subtracted 1.91 percentage points from GDP growth in the July-September quarter. Growth estimates for the fourth quarter are at 2.8% annualized rate. But owing to this, the economy still grew at a 3.5% pace in the third quarter.

But US stocks are trading sharply after Wanzhou’s arrest which has sparked fears between the Sino-US tensions. Also, the prices of the US Treasuries were trading higher while the dollar was weaker against several other currencies. Also, in October, exports of goods and services slipped by 0.1% to $211 billion. China has targeted the Soybean exports in the trade dispute and this has been dropping for the last several months and fell $0.8 billion. Exports of civilian aircraft and engines also fell.

Additionally, exports of petroleum and consumer goods were the highest on record. A strong dollar is probably restraining the overall export growth.

Imports Reach a Record High

With the trade deficit reaching an all-time high, this would mean that imports would have sky-rocketed. Imports of goods and services rose by 0.2 percent to $266.5 billion which is an all-time high. Consumer goods imports increased by $2 billion to a record high of $57.4 billion and were boosted by a $1.5 billion increase in imports of pharmaceutical preparations.

Another item that reached its highest record is motor vehicles as were other imports of goods. Imports are driven by high domestic demand as well as the strong dollar which is making the prices of imported goods cheaper and this offsets the impact of the tariffs.

At the same time, the ADP National Employment Report showed private payrolls rose by 179,000 jobs in November after the downwardly revised increase of 225,000 in October.

The forecasts show that private payrolls advanced 195,000 last month following a previously reported 227,000 increase in October.

This ADP report which was jointly developed with the help of Moody’s Analytics published ahead of the government’s more comprehensive employment report for November which is scheduled for release on Friday.

Nonfarm payrolls are likely increased by 200,000 in November after surging by 250,000 in October. The unemployment rate is forecast holding steady at half a century low of 3.7%.

Though the ADP report is a record that predicts the private payrolls component of the government’s employment report, job growth looks like its slowing. The main reason for this is due to the shortage of qualified workers.

The Decline in Hiring and Claims

In its third report, the Labor Department expressed that the initial claims for the state unemployment benefits dropped 4,000 to seasonally adjusted 231,000 for the week ended Dec. 1. Even though claims have fallen to 225,000 in the latest week, claims have risen for three straight weeks touching an eight-month high of 235,000 during the week ending November 24.

This is a reason to believe that the labor market has reached its peak. While job layoffs have increased, there is an uncertainty over facing tariffs and the stock market turbulence may have to be dented confidence as well, for companies that are trimming their staff.

The fourth report by the Institute for Supply Management (ISM) expressed that its non-manufacturing activity index rose 0.4 points to a reading last month of 60.7. Any reading above 50 indicates expansion in the sector which accounts for more than two-thirds of activity in the US economy.

But this time around, the ISM’s employment measure fell 1.3 points last month with employers in the construction industry reporting difficulties finding workers due to lack of qualified talent. Only time will tell if job growth would be triggered by policy-making and the change in trend in the job market.

You can read more about the unemployment situation in the US and stay updated. 

  1. I was permanently severanced from my job due to a Co. Reorg & received my last severance pay last week. I called UE & was told that I should now do my application online since I will no longer be getting funds & still without a job & that this coming Sunday regardless of knowing if I will or will not get benefits yet that I should still file a weekly claim in case of UE back pay.
    So my question is, do I still have to report 4 jobs applied to within this week, even if I do not know if I will be approved/denied for benefits until possibly next week anyway?

    1. Lynda,

      You should continue to report the job applications as long as you’ve been asked to do so. There will be a “Waiting Period” and the first payment will take about 7-10 days after which they’ll flow much quicker. Please call the Claims Center for clarification.

  2. I tried to transfer from one state to another. When I left Montana I was told there would be no problem transferring. When I arrived in North Carolina I had trouble reaching the area manager by phone. When he finally called me back he said to meet him for lunch to discuss when and where I would be working. He did not show up for lunch. Then he never returned any of my calls. I went PA to visit a friend a few weeks later and tried there. I met with the hiring manager and was told there should not be a problem doing the transfer since I was still in the system. I called the store a few times and they said it was still pending. Then I was terminated without even a phone call. Am I eligible for unemployment and if so do I file in Montana or North Carolina. I still have a Montana drivers license but I am living in NC.

    1. Stacey,

      As long as you were unemployed involuntarily, you should be able to claim UI benefits. Please consider applying.

  3. I have worked for 32+ years and recently have become unable to work due to health reasons, so I have had to resign from my job. I have contacted SS and will be able to apply for disability but it will take awhile to process. Can I apply for unemployment benefits? I live in WV.

    1. Sandra,

      UI benefits are only extended to claimants who lose their employment due to involuntary reasons. Please reach out to the Unemployment Office for more.

  4. I had to quit my job at Walmart in Fairmont West Virginia and moved back to my home state ky, I’ve got a son with drug problems and 3 older sisters that are not doing so well in health cause of their age. I didn’t understand about the transfer part they had at Walmart that I could put a date when I could start back because of my car problems I thought when I left I had to go in like in s few days, I’ve applied here at Walmart in Winchester ky 40391 two times already plus dollar store, speedway, truck stop, bp, a few other places it’s been going on 7 months without a job I live with my son and its getting harder on him paying rent and utilities and food, not to mention our personal hygiene stuff I really need help I have no income coming in to help him and his wife out I get foodstamps and Medicaid I was praying I could qualify for unemployment PLEASE HELP!!!

    1. Vicky,

      I can understand your situation. Unfortunately, UI benefits are only extended to claimants who lose employment due to involuntary reasons. Please call the Unemployment Office for further clarification.

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