It is mandatory for economists to point out that one data point does not make a trend. We then all-too-often fill space with, er, a discussion of one data point, most usually the monthly report on job creation. Not being one to defy convention, I will report that Friday’s jobs report was a yawner. The 217,000 new jobs created in May finally pushed total jobs above pre-recession levels, but the unemployment and labor force participation rates remained unchanged at 6.3 percent and 62.8 percent, respectively. No post-winter jobs growth spurt, at least not yet, but no reversal of recent growth either.
Enough about this one data point. The more important question is when will job-creation accelerate sufficiently to induce those who have dropped out of the labor market to re-enter, and provide what policymakers here have come to call “good-paying middle-class jobs.” Which in turn depends on when the various engines of economic growth will rev up sufficiently to overcome the braking power of mistaken economic policy.
Fortunately for the American economy and job-seekers, several engines of growth are already or about to replace the slower-growing but still healthy housing market; the collapsing market for legal and banking services (declines perhaps should be classified as removal of an impediment to growth); and the drag created by stagnation in France, Germany, and other parts of euroland, and in China, which is struggling to balance its need to clean up bank balance sheets and wind down inefficient state-owned enterprises, while preventing a slowdown sufficient to create a challenge to the stability of the communist political system.
Most important of the sputtering growth engines is trade, the freeing up of which President Obama promised would open export markets for hosts of American manufacturers and farmers.
As we say in New York, fuggedaboutit. Imports were up, and exports were down in April for the fourth time in five months, meaning that much American spending on gadgets and machinery went to foreign firms and workers. Any hope that freer trade deals will reverse that trend is fast fading. For several reasons:
· Domestic support for freer trade is evaporating as the belief grows that it does wonders for corporate profits, stashed overseas, at the expense of working men and women who watch their jobs vanish to Asia, Central America and Mexico. Trade unions have warned that in this congressional election year they will exact a price from any member that supports the trade agenda of the president they helped to elect. No surprise, then, that Senate majority leader Harry Reid has told the president that he will not even put freer trade to a vote, much less support a bill consenting to any free-trade treaty.
· Protectionist unions have allies in some board rooms. Makers of solar panels have persuaded the Department of Commerce to assess tariffs of up to 35 percent on imports of an expanded range of solar products from China.
· The boost provided to American exports by the Federal Reserve Board’s policy of printing money to drive down the dollar is being offset, at least in part, by the European Central Bank’s new policy of attempting to drive the euro down, and China’s on-going efforts to manipulate the yen so that its exporters have an unwarranted advantage in competition with our manufacturers.
Meanwhile, the president’s two ambitious free-trade agreements, the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TTP) are at least in serious trouble, or more likely quite beyond revival.
· France is insisting on protecting its farmers from the more efficient American agribusinesses, and BNP Paribus, its biggest bank, from the $10 billion fine US prosecutors have in mind for breaking sanctions on Iran, Sudan and Cuba. Foreign Minister Laurent Fabius says, “This … [Trans-Atlantic Trade and Investment Partnership] can only be established on the basis of reciprocity…. One cannot imagine that reciprocity can be the rule if at the same time there is a decision of this type.” In short, no trade deal unless France’s banks are allowed to operate in the America outside of the law.
· The success of anti-establishment, anti-freer trade parties in recent EU elections won’t make it easier for centrist parties to push through new trade deals.