- The Washington Times - Tuesday, September 13, 2011

Exports have been a rare strength and engine of growth in the U.S. economic recovery, aided by a big push from the Obama White House — but despite the positive signs, the sector has not proven to be the plentiful source of new jobs that many supporters had hoped.

An unexpectedly good performance of exports, which reached a record high of $178 billion in July, last week prompted economists to increase their estimates of U.S. growth in the first half of the year by as much as half a percentage point from earlier reported anemic levels under 1 percent. Thats no small feat when other parts of the American economy, including housing and consumer spending, are stagnant or in decline.

The double-digit growth in exports during the recovery has been nurtured by White House policies of promoting American business interests overseas as well as a pronounced weakening of the dollar, which has made U.S. goods cheaper and more competitive in fast-growing overseas markets.

The White House has even made some headway pushing China to allow its currency to rise against the dollar, helping to make China the fastest growing market for U.S. goods.

The strength of exports, despite an overall slowing of the global economy this summer, has provided a rare bit of “good news” and “much needed support to a crawling economy,” said Gregory Daco, an economist at IHS Global Insight. He expects “demand for U.S. goods to continue to hold, supported by robust emerging markets growth and a historically weak U.S. dollar.”

Manufacturing industries such as aerospace, industrial equipment and automakers have led the export boom with stellar sales in growing markets like China and Brazil and they are selectively adding jobs.

But the nearly 300,000 factory jobs generated so far in the recovery have not come anywhere close to putting 14 million unemployed people back to work.

President Obama gave little mention to his push to expand exports in his address to Congress on jobs last week. Earlier in his term, he had stressed the importance of refocusing the economy to rely more on manufacturing and exports for growth while depending less on housing and finance, where overinvestment and hyperbolic growth in the past decade led to a boom-and-bust financial crisis and recession.

Recent experience with exports has brought to the fore a fundamental flaw in the U.S. economy, said A. Michael Spence, fellow at the Council on Foreign Relations. While Mr. Obama is right to push exports, industries focused on overseas sales “tend not to generate a lot of employment,” he said, because exporters must be highly productive, lean and efficient to compete successfully in world markets.

By contrast, industries focused on sales in the domestic economy — such as housing, health care and education — are not as exposed to competitive global markets and face less pressure to be efficient and productive. Thats partly why theyre able to generate more jobs, he said.

The less competitive domestic or “nontradeable” sectors provided a whopping 98 percent of the jobs in the previous decade’s expansion, he said. So when those sectors went bust, they took down millions of jobs with them.

That has left a gaping job gap that is largely structural in nature, he said, as the lost jobs — particularly in housing and finance — may not come back for years, if ever, and workers will have to be retrained or redirected into other areas.

“A pattern of excess consumption fueled by excess leverage sort of hid this problem from view” during the boom years, but the structural flaw was laid bare by the financial crisis and recession, which wiped out the most unproductive jobs and companies, he said.

The permanent loss of millions of jobs in housing and other industries that benefited from the housing bubble is what led to todays record levels of long-term unemployment, economists say. The construction industry has the highest level of unemployment, 14 percent — suggesting that workers there have had particular difficulty finding appropriate work in other areas.

“Construction workers cannot easily move into computer technology or software development,” said John E. Silvia, chief economist at Wells Fargo Securities. Yet employers in technical fields often cannot find the skilled workers they need.

One way to tackle the mismatch, Mr. Silvia said, is with reforms in the unemployment insurance program suggested by Mr. Obama, enabling employers to train and try out unemployed workers while theyre still collecting benefits. Programs doing this have been successful in Georgia and New Hampshire. Mr. Obama even cited the Georgia program in his jobs speech.

“That may offer some hope for those out of work for long periods,” Mr. Silvia said. “The unemployed get to update their skills while employers receive a break on training costs.”

Mr. Obama also is pressing for more spending on infrastructure to put more construction workers back on the job. By repairing and expanding crumbling roads and ports, the infrastructure spending also helps to improve efficiency in the transportation sector and smooth the way for businesses engaged in trade, making them more competitive.

While trade has been a winning sector so far in the recovery, some trade experts say the administration has not gone far enough in promoting U.S. exports and fighting unfair trade practices such as Chinas suspected suppression of its currencys value. Republican presidential candidate Mitt Romney has made taking a stronger stand against China part of his campaign platform.

“There will be no effective job creation program that does not in some way substantially reduce the U.S. trade deficit,” trade expert Clyde Prestowitz said. He noted that the administrations previous efforts to pump up demand through tax cuts and infrastructure spending ended up helping China and other foreign producers as much as U.S. businesses because Americans used the cash to keep buying from overseas.

China, for example, is providing steel parts to be used in a San Francisco bridge being built under Mr. Obamas first stimulus program, he said.

This “leakage” of demand overseas is an important reason the recovery has “failed to launch,” Mr. Prestowitz said.

He advocates using aggressive measures to promote exports and fend off unfair competition from subsidized imports, including imposing countervailing duties on Chinese imports if the Asian giant continue to manipulate its currency to gain an advantage in trade.

“The fastest way to create 3 million jobs is to halve the trade deficit,” he said.