A broader, more meaningful measure is U-6, which considers workers who have only recently stopped looking for work, as well as part-time workers who want full time work. U-6 unemployment is 14.9 percent and was up about 0.2 percent in June.
Until 1994, the U.S. government also kept track of long discouraged workers. Then the method of collecting and calculating unemployment data was changed, and workers who said they would like to work but were so discouraged that they hadn't been looking for work for a long time were defined out of the calculation. But the consulting firm Shadow Government Statistics still does that calculation, and it's a shocker: 22.9 percent.
That's the share of Americans who say they would like to work but for one reason or another can't find work; are working only part-time but want to work full-time; or have become so discouraged that they have given up looking for work. That means the full-time workforce ought to be a quarter larger than it is.
Can you imagine what that would do to U.S. growth, tax collections, savings, investment, and long-term retirement prospects? The fact is that the U.S. economy is operating far below its potential. Estimates of how far vary, but a good guess is about 5 to 8 percent of gross domestic product, or close to $1 trillion.
A trillion dollars is real money, and it's money America isn't making. Why is the big question.
A significant piece of the answer can be glimpsed in a recent report by U.S. Trade Representative Ron Kirk. In a press statement about the Generalized System of Preferences, a series of trade preferences for developing countries, Kirk said: "GSP is a valuable tool for advancing the administration's goals to boost trade and to advance international economic development. The GSP program helps developing countries to grow their economies while also helping U.S. businesses, workers and consumers by lowering the costs of imported goods, including those used as inputs for U.S. manufacturing. The annual review allows the administration to ensure that the program is working as intended."
Got that? The focus is on promoting cheap imports. Looking at the U.S. trade deficit, I'd say the program is working as intended. But if the U.S. government spent a fraction of the effort it spends on promoting cheap imports on promoting domestic American production, the U.S. unemployment numbers would look a lot better, and the economy would be much closer to operating at its full capacity. For the United States to achieve growth without increasing debt, it must substantially cut its trade deficit.
Clyde Prestowitz is president of the Economic Strategy Institute and writes about trade for Foreign Policy.
