American Jobs and the Asian Crisis: The Employment Impact of the Coming

The recent collapse of Asian currencies and financial markets will have severe economic consequences for the United States. A slowdown or shrinkage in domestic demand in the Asian nations affected by the crisis will force them to export their way out of their problems, and the impact will spread throughout the global economy. As a result, the U.S. merchandise trade deficit could increase from an estimated $200 billion in 1997 to $300 billion to $400 billion within the next 12 to 24 months.1 This study analyzes the employment impacts of both a $100 billion and a $200 billion increase in the U.S. trade deficit, thus providing a range of estimates of the impact of the Asian crises on the U.S. labor market. This study finds that, if the U.S. trade deficit increases by $100 billion to $200 billion, 700,000 to 1.5 million jobs will be eliminated in manufacturing and other tradable goods industries, and these job losses will occur in every state. Male blue-collar workers will be particularly hard hit. If these losses are not immediately offset with substantially lower interest rates from the Federal Reserve, unemployment will rise and gross domestic product will fall by 1.3 % to 2.6%. But even if the Fed could lower interest rates fast enough and far enough to prevent the national unemployment rate from rising at all — an extremely difficult task — an increase in the trade deficit of this magnitude would mean a rapid shift of 600,000 to 1.1 million jobs out of manufacturing and tradabl