Economists Caution About Trade, Jobs Numbers

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Two bits of relatively good economic news came out Thursday: The nation's trade deficit declined in July, and the number of people applying for unemployment benefits also fell. But analysts warn against reading too much into either number. The trade deficit bounces around a lot, and unemployment claims remain high.


The stock market was up today on two bits of good economic news: the nation's trade deficit declined in July, and the number of people applying for unemployment benefits also fell.

But as NPR's Tamara Keith reports, it's all relative.

TAMARA KEITH: Spend enough time with economists and you'll start repeating this in your sleep: One month does not a trend make.

Professor PETER MORICI (Economist, University of Maryland): It is not uncommon to have movements up and down.

KEITH: Peter Morici is an economist at the University of Maryland. It's also safe to say the trade deficit is his issue.

Prof. MORICI: If we could get rid of half the trade deficit, we could lower unemployment over a couple of years to about five percent. That's how big it is.

KEITH: According to government data released this morning, in July the trade deficit fell sharply to $42.8 billion. The gap narrowed because exports grew while imports fell. But Morici says the drop in imports was the larger driver, which points to weak demand here in the U.S.

Prof. MORICI: As a consequence, we purchased fewer of just about everything from abroad, in particular automobiles and consumer goods, and things of that nature.

KEITH: The size of the trade deficit is one of the factors that effects the gross domestic product, the gauge used by economists to track economic growth. Last quarter, an expanding trade gap took a huge bite out of GDP. Jay Bryson, a global economist at Wells Fargo Securities says today's numbers may signal a better third quarter.

Mr. JAY BRYSON (Global Economist, Wells Fargo Securities): Trade will essentially be neutral in terms of GDP growth in the third quarter. So that's the good news. Trade probably won't be as a big of a drag as it was in the second quarter.

KEITH: On the employment front, first time claims for jobless benefits fell significantly to a still high 451,000. This was the second week in a row of improvement after a spike in claims last month. Heidi Shierholz is a labor economist at the Economic Policy Institute.

Ms. HEIDI SHIERHOLZ (Labor Economist, Economic Policy Institute): An economy that has 450,000 people applying for initial jobless claims every week, that's not an economy that's working for anyone.

KEITH: But to Wells Fargo's Jay Bryson, today's numbers show the economy isn't as bad as it seemed a couple of weeks ago.

Mr. BRYSON: They're both consistent with a story in which the probability of a double-dip recession, at least within the next few months, seems to be rather low.

KEITH: At least that's what it looks like today. Another round of data next week could tell a different story.

Tamara Keith, NPR News, Washington.

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