As the pessimists continue to bemoan the recovery and count on a double dip, some more good news was revealed on Thursday morning. U.S. exports hit a new all-time high in July as the trade gap shrunk to its second smallest size this year. Considering that demand is the biggest problem preventing more rapid hiring, steadily rising exports is an important part of the recovery narrative.
Here's the chart, based on Bureau of Economic Analysis data:
The red line represents the July value, which you can use to compare prior months.
For starters, you can clearly see that exports have grown to reach a much higher level than they were at prior to the recession. In July they were up to $178 billion, a 7.3% increase over their pre-crisis peak hit in July 2008. This does not take inflation into account, but looking at CPI (which doesn't perfectly reflect export price changes), inflation was less than 3% over this entire three-year period.
In fact, July's new high even soared well above the previous high hit in April by 1%. That's a pretty big gain to see in just a couple of months. This cannot be blamed on oil either -- the month's gains were spread throughout various goods and services. Of the $6.2 billion month-over-month increase in exports, just $1.3 billion comes from petroleum sales.
Of course, this raises an obvious question: if exports are growing, then why aren't jobs? Well, they have been -- just not as quickly as exports. This implies that workers have been producing more to satisfy rising global demand. Since there's a limit to how productive a worker can be, hiring will have to increase eventually, if exports continue to rise.
Finally, this is good news for GDP. If exports continue to shrink the trade gap in August and September, then trade will help to boost growth in the third quarter.