WASHINGTON – New trade data out Wednesday provided good news: The nation’s trade deficit narrowed to $40.6 billion in October, down from a revised $43 billion in September. But the reasons for the smaller trade gap in October – and throughout 2013 to date – have everything to do with the U.S. energy production boom, which is increasing exports and lowering imports of petroleum products.
If only that truly benefited jobs.
The numbers are stark. For the first 10 months of the year, the trade deficit in petroleum products narrowed by $48 billion, a 19 percent decrease. Among nonpetroleum goods, the trade balance actually widened by more than $20 billion, a 5.6 percent increase. Those numbers are not adjusted for inflation, but energy prices have been broadly stable in the last couple of years.
The shift is visible both in the form of more fuels being exported and fewer imported. Most dramatically, so far this year the worth of crude oil the United States imported fell by $36.3 billion compared with the same period of 2012, a 13.7 percent drop. Crude oil exports, meanwhile, rose by $1.6 billion, a whopping 84 percent rise. (The U.S. imports a lot more crude than it exports, as the vast majority of domestic oil production serves the U.S. market.)
A similar story is evident with natural gas. Production is booming amid the rise of hydraulic fracturing technology, and while most of that is for domestic consumption, natural gas exports are up by $1.3 billion, or 35 percent, through the first 10 months of the year.
Those effects are big enough to move the dial on overall economic growth. If the percent change in the trade balance on portfolio products through October persists for the full year, it will reduce the trade deficit – and by extension, increase overall U.S. economic activity – by $235 billion, adding 1.5 percentage points to 2013 GDP growth.
In other words, a booming energy sector and higher energy efficiency has resulted in less imported oil and other petroleum products, and more exports, with an effect powerful enough to add to overall growth.
But what about jobs? There, the direct effects are less dramatic than one might hope. The number of jobs in the oil and gas extraction sector is increasing, just as one might expect. But in the scheme of things, the industry doesn’t account for many jobs. There were just under 200,000 jobs in the oil and gas extraction industry in October, and an additional 304,000 in support activities for oil and gas extraction (as of September; that number is released with a delay). The two sectors added a combined 31,000 jobs in the 12 months ended in September, which is a mere blip in a nation that added 2.3 million jobs in that span.
The number of jobs directly involved in getting oil and gas out of the ground remains quite small, even as America’s petroleum trade balance has shifted dramatically. This shouldn’t be completely surprising. Oil and gas are industries where a huge portion of the economic output created comes not from the labors of workers or machines, but from a scarce substance that happens to be located below the ground. You would expect for the great majority of extra GDP driven by petroleum exports to translate not into more jobs for people who work in or support oil and gas extraction, but into profits for oil companies and owners of the land that is being tapped.
As such, the better trade numbers are welcome – but not as welcome for unemployed workers as they might be if GDP growth was driven by industries where the value is created by workers’ hands, not dug up out of the ground.