Article at a glance:
The enormous US trade deficit has caused many observers to conclude that international trade, particularly a massive flood of imported goods from China and of services from India, is to blame for the loss of US jobs since 2000. In fact, research shows that only 11 percent of the job losses in manufacturing—about 314,000 jobs—can be attributed to trade, and even in this instance the real culprit was falling exports, not rising imports. Offshoring in the services sector destroyed even fewer jobs. The real causes of job losses were weak domestic demand, rapid productivity growth, and the dollar's strength.
The take-away
Protectionism won't address the causes of the loss of US manufacturing jobs in recent years. The real solutions—stimulating domestic demand, cutting the budget deficit, and pushing countries with artificially low currencies to allow them to appreciate against the dollar—are harder to implement but more likely to boost employment.
This article includes the following exhibits:
- Exhibit 1: Recovery from job loss in United States during selected business cycles
- Exhibit 2: US employment gains and losses by sector, 2000–03
- Exhibit 3: Change in employment in IT occupations, 1999–2003