Conservative pundits incautiously hail the 277,000 private-sector jobs created by the economy in March as the long-awaited “jobs turnaround.” Alas, the Bureau of Labor Statistics payroll survey indicates a continued jobs malaise.
A look at the composition of the 277,000 jobs reveals job growth in sectors that do not generate export earnings or face import competition. Construction accounted for 71,000 of the new jobs; retail 47,000; health care and social assistance 39,000; restaurants and bars 27,000; professional and technical services 27,000; administrative and waste services 17,000; repair, maintenance and laundry services 12,000; wholesale 11,000; warehousing and storage 7,000; logging and mining 7,000; financial activities 6,000; air transportation 3,000.
In goods production other than domestic construction, the economy remains dead in the water: manufacturing jobs, zero; semiconductors and electronic components, zero; communications equipment, zero; computer and peripheral equipment, zero; textile mills, zero; paper, zero; chemicals, zero; primary metals, minus 1,000; transportation equipment, minus 1,000; electrical equipment and appliances, minus 2,000.
This is not a profile of a high-tech knowledge-based economy. It is not even the profile of a low-tech developing economy.
It is the profile of an economy in serious trouble. Where are the jobs for skilled workers or jobs for university graduates in engineering, or research and development jobs for scientists? Where are the jobs in export and import-competitive sectors to close the massive U.S. trade deficit?
On April 2, the release day of the March jobs report, research economist Charles W. McMillion reported in Manufacturing & Technology News that “the superiority the United States has held in technology trade has suddenly vanished.”
For the first time on record, during the last half of 2003 the United States ran a trade deficit in advanced technology products and services. As recently as 1997, the U.S. had a $60 billion trade surplus in technology goods and services.
The new millennium saw acceleration in outsourcing technology jobs. Mr. McMillion reports the U.S. has had a deficit in advanced technology products with China since 1995 and an overall technology goods and services trade deficit with China since 1999. The U.S. technology deficit with China is almost 5 times larger than the U.S. technology deficit with Japan.
These facts do not reconcile with the reassurances from pundits that the U.S. has nothing to fear from China, allegedly a low-tech producer of textiles and shoes.
Recently, the American public has been deceived by a spate of “studies” sponsored by offshore platforms and by interest groups that benefit from outsourcing. These propaganda exercises purport to show Americans benefit from outsourcing.
Where is the benefit for Americans when the U.S. economy cannot create jobs in export and import-competitive industries in order to close the massive trade deficit?
Where is the benefit for Americans when dollar devaluation drives up energy prices?
Where is the benefit for Americans of losing the lead in advanced technology products?
Where is the benefit for Americans of declining U.S. enrollments in electrical engineering and computer science?
Where is the benefit for Americans of having their human capital destroyed by replacement with cheap foreign labor?
Economists who are not up-to-date trade specialists are far behind the latest knowledge when they proclaim, because they are the results of free trade. all these developments must be good for America. In the latest work in trade theory, Ralph E. Gomory and William J. Baumol build on earlier research and demonstrate a country’s gains in productive capability can worsen the positions of its trading partners.
Their work has definite implications for trade policy. Not only can a country with a successful trade policy capture industries from a free-trade country, but a country that transfers its high-tech occupations and production abroad to lower the cost of producing for its domestic markets reduces its own capability while increasing that of a competitor.
The notion the U.S. can base production offshore and still come out ahead flies in the face of everything we know about economic development.
Some pundits have the mistaken impression foreign direct investment in the U.S. renders offshoring concerns pointless. With so much foreign capital pouring into the U.S., how could the U.S. economy be any but the best?
The answer is that 95 percent of foreign direct investment during 1999-2002 (the last four years for which data are currently available) was used to acquire existing U.S. assets and their future income streams. We are paying for our dependence on imported goods by turning over the ownership of our economy to foreigners.
Paul Craig Roberts is a columnist for The Washington Times and is nationally syndicated.
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