2021 current account deficit biggest on record; initial jobless claims fall to lowest since 1969

Washington

THE US current account deficit narrowed in the fourth quarter, but the shortfall in 2021 was the largest on record amid a surge in imports as businesses rushed to replenish depleted inventories to meet strong demand.

The Commerce Department said on Thursday (Mar 24) that the current account deficit, which measures the flow of goods, services and investments into and out of the country, shrank 0.9 per cent to US$217.9 billion last quarter. Economists polled by Reuters had forecast a US$218.0 billion deficit last quarter.

The current account gap represented 3.6 per cent of gross domestic product, down from 3.8 per cent in the July-September quarter. The deficit peaked at 6.3 per cent of GDP in the fourth quarter of 2005. The US is now a net exporter of crude oil and fuel.

For all of 2021, the current account deficit shot up 33.4 per cent to an all-time high of US$821.6 billion. The deficit last year represented 3.6 per cent of GDP, the largest share since 2008 and up from 2.9 per cent in 2020. The yawning current account gap in 2021 is not a problem for the US given the dollar's status as the world's reserve currency.

Exports of goods increased US$332.9 billion to US$1.76 trillion last year, while imports of goods jumped US$502.3 billion to US$2.85 trillion.

The narrowing in the current account deficit last quarter reflected a smaller shortfall on secondary income and increased surpluses on services and on primary income.

Exports of goods and services to, and income received from, foreign residents increased US$47.7 billion to US$1.01 trillion in the fourth quarter. Imports of goods and services from, and income paid to, foreign residents rose US$45.8 billion to US$1.22 trillion.

Meanwhile, Bloomberg reported that applications for US state unemployment insurance fell last week to the lowest since 1969 as employers desperately try to hang onto workers amid near-record job openings and depressed labour-force participation.

Initial unemployment claims decreased by 28,000 to 187,000 in the week ended Mar 19, Labor Department data showed on Thursday. The median estimate called for 210,000 applications in a Bloomberg survey of economists.

Continuing claims for state benefits dropped to 1.35 million in the week ended Mar 12, the lowest since 1970. Applications should stay low as the combination of dwindling savings and decades-high inflation is raising Americans' financial incentive to work.

The level of claims is the lowest of the pandemic period, reflecting a jobs market that Federal Reserve chair Jerome Powell described as being at a "tight to an unhealthy level" last week. He also cited millions of job openings and a historically low unemployment rate. REUTERS, BLOOMBERG