Record Trade Deficit With China -- Good News for U.S. Jobs

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The deficit with China is running at an annual rate nearing $200 billion through September, trouncing last year's record deficit of $162 billion.

The deficit with China is running at an annual rate nearing $200 billion through September, trouncing last year's record deficit of $162 billion.

Critics say the deficit is the result of free trade agreements that reduce the cost of products for U.S. consumers but send American jobs overseas, where labor costs are lower.

“Such criticism fails to tell the other side of the story,” says Dr Mark Skousen, an adjunct professor at Columbia University and chairman of http://www.investmentu.com

“Stop worrying about the trade deficit and buy China’s cheap goods. It stimulates job creation, not job loss,” says Dr Skousen.

“What is seen is the loss of manufacturing jobs to overseas jobs…but what is not seen is the creation of millions of new jobs as a result of lower consumer prices for products made by foreigners, such as the Chinese. Lower prices mean consumers have more discretionary income to spend on other things, which stimulates job creation in other areas. In fact, we’ve seen an increase in servicing, mining, construction and trade,” he says.

Consider that:

  •      According to the McKinsey Quarterly Report, only about 314,000 (11% of the manufacturing jobs lost) were lost as a result of trade, and that falling exports, not rising imports, were responsible.
  •      “Service sector offshoring destroyed even fewer jobs. These figures are tiny relative to the millions of positions lost and created every year in the United States by normal market forces,” the report adds.
  •      On a net basis, employment overall is on the rise. New data released by the National Statistics Office show the number of people in full-time employment increased, and the number in part-time employment (as a primary job) increased significantly yet again. Additionally, self-employment continued to rise while employment in government departments continued to fall.
  •      Unemployment rates are historically low (5%), indicating that despite the high trade deficits, we are enjoying virtually full employment, and better net job creation than Europe.

Bottom line: The record trade deficit with China is good news for U.S. jobs.

Dr. Mark Skousen is an economist and has taught economics at Columbia University. He has been editor in chief of Forecasts & Strategies -- an award-winning investment newsletter -- and three trading services. He recently joined us as the Chairman of Investment U., a free educational advisory with over 300,000 subscribers. For more information about our editors, or to set up an interview, please contact Juan Muñoz at 410.223.2693 or jmunoz@oxfordclub.com , or visit http://www.investmentu.com

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