At Home
June 6, 2013

Americans are saving and exporting more.

By Edward Gresser

THE NUMBERS: Nine U.S. ‘output’ industries* as share of U.S. GDP –

2009: 24.4%
2012: 26.3%

* Manufacturing, farming, natural-resource industries, software, Internet, other information, scientific research, and creative arts industries. These industries accounted for about 45 percent of all U.S. growth from 2009 to 2012.

WHAT THEY MEAN:

Five years after the fall, are low growth and high unemployment a “New Normal?” If you are an analyst examining the bottom lines of GDP reports, perhaps so. If yours was one of the vanished construction jobs, for sure. But there’s also a more complicated and optimistic story: one of contraction in some parts of economic life and growth in others, a painful evolution, and an emerging economy different from the one before. An outline:

Saving & Borrowing: With less confidence in job security and diminished home equity, Americans are more conscientious savers. In 2007, businesses saved $271 billion and families $249 billion; in 2012, the figures were $1.2 trillion for businesses and $471 billion for families. This is continuing: By the New York Fed’s count, over the first three months of 2013, families reduced credit-card debt by $19 billion, auto-loan debt by $11 billion, and mortgage debt by $100 billion. With home-buying and borrowing down, the financial-service, construction, and real-estate sectors have contracted, shedding a net of 2.4 million jobs and falling from 25.8 percent of the economy in 2006 to 23.8 percent in 2012.

Exporting & Importing: With domestic borrowing and spending down, American businesses have become more energetic exporters. Exports have jumped by about $610 billion (from $1.58 trillion to $2.19 trillion) between 2009 and 2012, and risen from 11.4 percent to 13.9 percent of GDP. The import-to-GDP ratio by contrast is down a bit from its 2008 peak, dropping from 17.9 percent then to 17.5 percent now. The national trade imbalance has accordingly narrowed, from $753 billion in 2006 and $700 billion in 2008 to $540 billion in 2012 and a possible $460 billion this year.*

Rebalance: The resulting economy is one in which industries that produce goods, information, and creative arts have grown as finance, construction, and real estate contract. The combined output of American factories, farms, mines, software campuses, Internet industries, movie studios and other creative arts centers, computer systems, and scientific and engineering research labs has risen from $3.2 trillion to $3.8 trillion – essentially half of the economy’s post-crisis growth – while adding 1.2 million jobs and rising from 24.4 percent to 26.3 percent of GDP since 2009. Manufacturing is the largest case. Having rebounding from $1.54 trillion in grim 2009 to $1.87 trillion in imperfect 2012, it has grown as a share of GDP for three consecutive years. According to the Commerce Department’s “GDP by Industry” database, this is the first such three-year stretch since the Second World War.

All this offers little consolation to the family whose asset-wealth has shrunk by half, and still less to the unemployed worker. It is nonetheless a more interesting, more complicated, more optimistic, and ultimately more accurate story than “the New Normal.”

FURTHER READING:

Stop using this phrase –

NYT’s Adam Davidson on what the New Normal is like: http://www.nytimes.com/2013/01/06/magazine/what-will-the-economys-new-normal-look-like-in-2013.html

National Review’s James Pethokoukis urges readers to resist the New Normal: http://www.nationalreview.com/articles/344353/resisting-new-normal-james-pethokoukis

Analysis –

The New York Fed reports on family “deleveraging” in early 2013: http://www.newyorkfed.org/newsevents/news/research/2013/an130514.html

And has a cool chart showing the rise and decline of household debt, from $8.3 trillion in 2004 to $12.7 trillion just before the crash, and now $11.2 trillion: http://www.newyorkfed.org/householdcredit/

The Economic Report of the President 2013 offers context: http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-President/2013

And the International Monetary Fund’s World Economic Outlook 2013 looks at the year ahead: http://www.imf.org/external/pubs/ft/weo/2013/01/

Data –

The Commerce Department’s GDP-by-industry database, updated with 2012 figures: http://www.bea.gov/iTable/index_industry.cfm

And more from BEA on GDP, savings and investment, etc.: http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1

And a bit more detail, with less optimism, on exporting –

The Obama administration’s National Export Initiative, launched in 2010, pledged a doubling of U.S. exports by 2014. (This would be from $1.59 billion in 2009 to $3.18 trillion in 2014.) A two-half year export boom followed, in which exports rose by 16.7 percent in 2010 (after a plunge of 30 percent in 2009, the steepest drop since 1938), and by 14 percent in 2009. Since then the export boom has sputtered and stalled; growth was 4.5 percent in 2012, and was running at 2.5 percent in the first quarter of 2013. In dollar figures the trends look like this:

2010 $260 billion
2011 $270 billion
2012 $90 billion
2013? $45 billion?*

* Full-year projection from January-March export totals.

By industry, natural-resource exports – oil, metal ores, gold, timber, etc. – have already doubled since 2009, as have sales of recycled goods. Manufacturing and farm exports are up by about 50 percent; commercial services dropped least in 2009 and, with the least ground to recover, have grown slowest. Nonetheless, exporting needs some new energy.

President Obama announces the N.E.I., 2010: http://www.whitehouse.gov/the-press-office/remarks-president-export-import-banks-annual-conference

And the U.S. trade data, 2013: http://www.census.gov/foreign-trade/Press-Release/current_press_release/

And finally, a note on government in the economy –

As of first quarter/2013, the ‘government’ share of GDP has fallen to 18.9 percent, the lowest figure in the BEA’s records since 2006.