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U.S. trade gap contracts sharply in hopeful sign for economy; jobless claims fall


(Photo Credit: Ian Waldie/Bloomberg)

The U.S. trade deficit narrowed significantly in July and applications for unemployment benefits fell more than forecast, according to government reports that lifted hopes about the economic recovery.

Stocks jumped and the dollar regained some ground against the Japanese yen following the announcement of the news.

The large trade gap has been one of the most vexing problems facing the U.S. economy. In the second quarter of this year, a sharp and unexpected surge in imports and slowdown in exports cut nearly 3.4 percentage points off of U.S. economic growth.

Trade figures released by the Commerce Department Thursday morning showed that some of that was made up in July when the deficit fell 14 percent to $42.8 billion, much more than economists had forecast. It was the biggest drop in 17 months.

Exports were up 1.8 percent for a total value of $153.3 billion, the highest in two years thanks to strong sales of U.S. jets, industrial machinery and computer equipment and other manufactured items. Imports, which had been growing, fell 2.1 percent to $196.1 billion.

But despite the improvement in July, the cumulative deficit for the first seven months of 2010 remained high compared to last year: $288.83 billion versus $203.96 billion.

The Obama Administration has said that as part of its plan to return the U.S. economy to strong growth it hoped to double exports in five years.

The politically-charged trade deficit with China fell about 1 percent in July as exports jumped.

The Labor Department said Thursday that new filings for jobless claims fell a seasonally adjusted 27,000 in the week ending Sept. 4 to 451,000. That was the lowest in two months but still higher than it would be in a healthy economy, but it means that companies may be holding off from further layoffs. About 4.5 million people continued to draw unemployment aid in the week ending Aug. 28, about 2,000 less than the previous week.

By Ariana Eunjung Cha  |  September 9, 2010; 9:19 AM ET
Categories:  Trade , Unemployment  
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This report is utter hogwash. The number are invented and the statistics behind them are fantasy. It's rather like the unemployment report you idiots have plastered on todays page. The government only got that number by completely ignoring the data from nine states! Unemployment, even using the bogus model this Administration has been using, rose a full percent last month. The trade imbalance increased!

Posted by: mibrooks27 | September 9, 2010 4:17 PM | Report abuse

LET'S SEE- Historically, the U.S. has always run a trade deficit. It comes from Americans buying more than they sell. Hmm. Okay, since Americans are consumers that makes sense. NOW, all of a sudden, in the midst of the worst economic crisis since the Great Depression, the trade deficit shrinks. Hmm.

So, what do you think? Do you think the trade gap is shrinking because Americans are selling more to other countries, which are also in the throes of a horrific recession? Well, this administration wants you to think this is Good News! Say what?!

The reality is the shrinking trade gap is the result of AMERICANS HAVING NO MONEY TO BUY FOREIGN GOODS! THIS IS BAD NEWS, NOT GOOD NEWS, people!

Anyone who thinks THIS shrinking trade gap is a good thing (in this recession) should have his or her head examined.

Posted by: InHarmsWay | September 9, 2010 4:26 PM | Report abuse

"Historically, the U.S. has always run a trade deficit."

No, it has not. Trade deficits have been chronic only for about forty years, since the early 1970's.

The reason a shrinking trade gap is indeed a good thing is that it indicates improvement in the balance between what people are earning and what people are spending. As long as we're earning at least as much from production as we spend on consumption, we're more or less sustainable. When we have these trade deficits that reach a sizable fraction of a trillion dollars, that's money we're spending that nobody in the US is earning a piece of.

The bad news part of that story is that the trade deficit just between the US and China actually grew. China is bleeding our economy like a gargantuan leech.

Believe me, trade deficits have about the same effect on the economy as leeches have on the human body. They'll kill you, if you let them work at it long enough.

Posted by: lonquest | September 9, 2010 7:14 PM | Report abuse

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