Trade Deficit Widens as Job Openings Skyrocket

The U.S. is importing and exporting fewer goods while the demand for workers rises to a record.

The U.S. is importing and exporting fewer goods while the demand for workers rises to a record.

The Department of Commerce said in a report Tuesday that the total trade deficit rose to $41.9 billion in May, roughly meeting the average level seen since the Global Financial Crisis. That is an increase over April.  Imports, however, fell from April to May and total imports are at $230.5 billion.  Thus far, in 2015, the total trade deficit widened 0.5% though imports and exports have seen a slow and steady decline.  On a year-over-year basis, the trade deficit for goods and services rose by $1.2 billion, with exports falling $6.8 billion and imports falling $5.6 billion from a year ago.

Weak Demand for Imports

While the weak export figures were largely expected as a slowdown in China and protracted difficulties in Europe crimp demand for U.S. goods and services, the weakness in imports has alarmed some economists who warn that it is an indicator of weak aggregate demand in the U.S. economy.

According to the Commerce Department, the U.S. saw a 2.3% fall in imports on a year-over-year basis in May, even as total prices rose for consumer goods. Some economists warn that a pickup in the labor market is not translating into more robust spending for imports, which could have significant implications for foreign markets and limit growth prospects for the U.S. in the near term.

Jobs Data Criticized

Many indicators of labor market strength, including a rise in total payrolls, a fall in the unemployment rate, and a decline in average initial unemployment claims, has encouraged some economists to remain confident in a continued growth of the U.S. economy.

A more recent report from the Bureau of Labor gives further confidence to the narrative of an improving labor market, with total job openings rising to 5.4 million, the largest on record since the BLS began tracking openings in December 2000. At the same time, hires remained steady at 5 million in May, with voluntary quits also unchanged at 2.7 million in May.

The number of job openings, which has risen at a very strong pace since the beginning of 2014, has been the primary evidence for a rise in total spending and average hourly income. Bullish expectations for higher spending and earning in late 2014 helped consumer discretionary stocks at the time.

However, most of those equities have since retreated as the projected spending and income failed to materialize. Average hourly earnings rose 2% in June, which was a slower pace than in May and below the rate of inflation. At the same time, labor participation has continued to slide and the employment to population ratio remains at historic lows.

Some economists are dismissing the rise in jobs opening as an indication of the lower cost of seeking labor, pointing to the inability of most Americans to see income gains as an indicator that the labor market remains pressured.