News flash: Jobs added in May, unemployment down, trade deficit up!

This morning saw the release of two government reports, on trade and employment, that together paint a picture of an economy performing reasonably well, although in a way that is at odds with the worldview of the Trump administration.

On employment, President Trump’s Secretary of Labor Alexander Acosta applauded the fact that the headline U3 unemployment rate dropped to 4.3 percent in May, its lowest point since 2001. Left unsaid by the Labor Secretary is that his boss, President Trump himself, has dismissed U3 as “totally fiction” because it does not capture the 94 million adult Americans who are not employed and not actively seeking for work.

Secretary Acosta also touted the number of jobs added so far in the Trump administration:

“More than 600,000 private-sector jobs have been created since Inauguration Day. These continued improvements have real impact on the lives of American families, as more people take home a paycheck.”

He could have added that that number includes a net gain of 43,000 manufacturing jobs.

The news was not so good on the trade front, at least from the Trump administration’s perspective. The U.S. Census Bureau reported this morning that the nation’s trade deficit in goods and services in April reached $47.6 billion. In the first four months of 2017, under President Trump’s watch, the cumulative U.S. trade deficit has grown by 13.4 percent compared to the same period in 2016. U.S. exports of goods and services are up 6.4 percent, but those pesky imports are up 7.7 percent.

For a president who has blamed the trade deficit for a host of economic ills, and has made its reduction and elimination a priority, this surge in the trade deficit is difficult to explain. The economy is doing quite well, and the administration is quick to take credit for it, while at the same time imports are growing faster than exports!

In reality, there is no contradiction. As I’ve noted before, the trade deficit is not a scorecard of our trade policies or our economic performance. If anything, the trade deficit will tend to expand as economic growth accelerates, reflecting both increased domestic demand as well as increased inward foreign investment. To the extent that both imports and exports are increasing, this points to a healthy expansion of trade and can only fuel competition, productivity, and growth.

The Trump administration should continue to tout economic growth and job creation, while dropping its misguided obsession with the balance of trade.