December 9, 1998
NOTE TO EDITORS
The latest issue of the New York Fed's Current Issues in Economics and Finance--Viewing the Current Account Deficit as a Capital Inflow--is enclosed for your review.
Authors Matthew Higgins and Thomas Klitgaard, senior economists in the Bank's International Research area, observe that the high current account deficit--the broadest measure of the nation's trade deficit--has raised concerns about the possible loss of jobs in the United States.
Pressure on U.S. firms to lay off workers has been building as a result of increased competition at home from low-cost Asian imports and a decline in the sale of U.S. goods abroad due to rising prices caused by a strong dollar and turmoil in the Asian markets.
Although export and import trends validate these concerns, Higgins and Klitgaard note that the unemployment rate tells a different story. The current account deficit has mounted--to around $225 billion in 1998--yet unemployment is at a quarter-century low. Accordingly, the authors suggest that the concerns over U.S. job losses are misplaced, and their study takes a closer look at the relationship between a high current account deficit and employment.
Higgins and Klitgaard conclude that:
Contact: Douglas Tillett