At the start of 2022 most measures show the U.S. economy is booming, with an unemployment rate that is approaching record lows and a demand for goods that has imports from the rest of the world surging.
On Friday, the Labor Department announced that the unemployment rate had fallen to 3.9% in December, even as the economy produced a smaller-than-expected increase of 199,000 new jobs. The report came a day after the Commerce Department announced that U.S. imports in November had increased by 4.6% over the previous month to $304.4 billion.
The rising level of imports contributed to a trade deficit of $80.2 billion for the month, which is close to the record high of $81.4 billion set in September. While a large trade deficit is seen as a negative by many, particularly former President Donald Trump, who went to great lengths to close the gap between imports and exports, economists say it points to a U.S. economy that is leading the global recovery from the pandemic-induced recession.
“When we do better than everybody else, we get a bigger trade deficit,” said economist Gary Hufbauer, a senior fellow with the Peterson Institute for International Economics.
US as economic engine
It’s a popular misconception that a trade deficit is a sign of bad economic times in the United States, Hufbauer told VOA. “Not at all. It’s an indicator of great times in the U.S., relative to other countries. And that's exactly where we are. We're doing very well, relative to other countries, so the dollar tends to be stronger, that tends to increase the trade deficit, because demand is greater.”
The benefits of a strong U.S. economy are felt around the world, as other countries find U.S. consumers eager to purchase their goods.
China, as usual, was the largest net beneficiary of the U.S. trade deficit, selling U.S. consumers $28.4 billion more than it purchased. The U.S. ran a significant trade deficit with other trade partners as well, including the European Union, at $19.4 billion; Mexico, at $11 billion; Germany, at $6.1 billion; and Canada, at $5.4 billion.
The U.S. runs a trade surplus with only a few partners. The largest is a $4.5 billion surplus with all of Central and South America. The only other surpluses of $1 billion or more are with Hong Kong, at $1.6 billion, and Brazil, at $1.0 billion.
Job growth continues
The monthly jobs report from the Department of Labor, released Friday, told a similar story of an economy that continues to demonstrate a strong recovery from the pandemic recession. The 199,000 figure for the month of December was lower than expected but contributed to an average of about 537,000 jobs per month over all of 2021.
All told, the unemployment rate fell from 6.4% at the beginning of the year to 3.9% in December.
Not all of the decline in unemployment can be attributed to job growth. Millions of American workers dropped out of the labor force, largely as a result of the pandemic. That means that even though the unemployment rate is low, there are still about 3.6 million fewer workers in the U.S. than there were in the months prior to the beginning of the pandemic.
“We still have aways to go in terms of absorbing the labor force, and people who've left the labor force, as well as population growth, but it's certainly a positive sign,” said Elise Gould, senior economist with the Economic Policy Institute, a Washington think tank.
On a more sobering note, the report revealed that when it comes to employment, the economic recovery has not been evenly distributed. From November to December, the unemployment rate among Black Americans rose from 6.1% to 6.5%. The problem is particularly acute among Black women, who face an unemployment rate of 5.6%, double the rate of white women.
Omicron is wild card
What the most recent economic data cannot yet tell us is the degree to which the surging omicron variant of the coronavirus has had on U.S. employment. The Labor Department uses a “reference week” each month when calculating job numbers, and the reference week in December was unusually early, encompassing Dec. 5-11, before the omicron surge began in earnest.
“Most of it happened in the second half of the month,” Gould told VOA. “So, it's really not being reflected here at all. On February 4, when the January data comes out, I'm sure we will see a pretty big impact — hopefully a short-lived one — but probably a significant impact on the labor market.”