February 05, 2015
Economists and economic reporters are fortunate they don’t work in an occupation like dishwashing or truck driving where job security and promotion depend on performance. If they did, most of the folks currently employed would be on the street after missing little things like an $8 trillion housing bubble.
But no reason to recount old history. Remember all those stories of the booming U.S. economy? Well, they are likely to be just memories. The December trade data was released today. It showed a monthly deficit of $46.6 billion, up from an originally reported $39.0 billion in November (revised up to $38.8 billion in this report).
This will likely push the revised 4th quarter GDP growth to below 2.0 percent. Weak durable good shipments for December reported yesterday will also lower 4th quarter GDP. In short, it don’t look like much of a boom.
For fans of national income accounting (i.e. people who live in the real world), the rise in the trade deficit is very troubling. This is the core cause of secular stagnation. This is U.S. generated demand that is creating demand elsewhere. There is no easy mechanism to replace it. We could have larger budget deficits, but that goes against the fashions in Washington policy circles. That means, in the absence of another bubble, we can look to an underemployed economy persisting for some time.
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