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The Numbers:

American imports:

July 2008:	$230 billion
October 2008:	$208 billion
November 2008:	$183 billion

What They Mean:

In the second week of each month, the Commerce Department releases a 47-page sheet of trade data covering total imports and exports, trade by country, exports by state, and so on. Yesterday's version, which covered November 2008, found that the month's imports had fallen by $25 billion, or 12 percent, from October's $208 billion. Both this drop, and the five-month decline from the July peak, are the fastest import drops since 1942. Some background and implications:

The normal pattern of American economics is for imports to grow, as shoppers pick up mall purchases and businesses buy metal, semiconductor chips, and energy. Anxiety emerges when this growth speeds dramatically, reflecting an upheaval in commodity prices or a rearrangement of global industry -- but almost invariably, except in the case of sudden surges in energy prices, total job numbers rise when imports are rising. When imports go down, on the other hand, it means nobody is buying things and the economy is in recession. Since World War II, therefore, periods of recession and job loss match falls in imports almost perfectly:

• Eleven recessions -- The National Bureau of Economic Research, anointed as official recession-arbiter, with eerie appropriateness, by Hoover in 1929, counts the postwar recessions as: 1948-49, 1953-54, 1957-58, 1960-61, 1973-75, 1980-82 (which is officially considered two recessions), 1990-1991, 2001-03, and then 2007 to the present.



• Nine employment drops -- Total employment has fallen nine times: 1949, 1953, 1958, 1960, 1974, 1981-82, 1991, 2001-2002, and 2008.



• Nine falls in imports -- Imports fell in 1949, 1953, 1954, 1958, 1959, 1960, 1975, 1982, 1991, and 2001. This year, imports began to fall in July and are now apparently nose-diving.

Adjusting for inflation, Commerce Department data show the largest "real-dollar" import drops since the Second World War are those of 1975 and 1980, when imports fell by 11.1 percent and 6.6 percent, respectively. These coincided with the postwar era's highest unemployment rates, 9 percent in 1975 and 10.8 percent in 1980. The 1991 and 2001 recessions, during which unemployment peaked in the sixes and sevens, brought "real" imports down by only 1.0 percent and 2.7 percent, respectively. The highest import declines on record are those of 1930 (13 percent), 1931 (13 percent), 1932 (17 percent) -- by which time joblessness reached 25 percent, and 1938 (22 percent).

With all this in the background, this month's Commerce Department report becomes a bit chilling. None of the 800 such reports released since the Second World War has recorded so steep and rapid a drop. In real-dollar terms, the drop is a bit less precipitous, as some of the decline comes from lower oil prices; but still marks a one-month 6.8 percent drop in merchandise imports, and an 11 percent drop from the records for November 2007 -- almost equal to the grim 1975 figures, creeping up on 1930, and an index of how big a challenge the new president has in restoring demand, growth, and health.

Further Reading:

The Commerce Department's November 2008 trade release:
http://www.census.gov/foreign-trade/Press-Release/
2008pr/11/#full

And the Bureau of Labor Statistics' companion jobs report for December:
http://stats.bls.gov/news.release/pdf/empsit.pdf

A bright side? Services trade seems to be holding up better than goods. And balance-of-payments aficionados can point to radical improvement in the trade deficit. November's $40 billion deficit -- $183 billion in imports, minus $143 billion in exports -- was down 30 percent from the $60-billion deficits of last summer, 40 percent below the July 2006 record, and the lowest deficit relative to GDP since 1999. The full-year 2008 deficit, in total and for manufacturing alone, looks to be the lowest since 2003, and next year's may be the lowest since 1997. The 2008 recession, thus, seems to be reducing our imbalances much more effectively than the 2001 recession did. But the deficit is falling not because exports are rising, as they were earlier this year; instead, with Europe, Japan, China, and oil-exporter economies also in recession, imports are just falling faster than exports. A lower deficit achieved through lower imports does not mean employment or production; rather the reverse.

By country -- Comparing America's November imports to October, few countries are holding up well. The fastest falls are in consumer goods and energy; so imports from China fell the furthest of any single country, by $5.5 billion or 20 percent in a month, and the steepest declines in percentage are in imports from Saudi Arabia, Venezuela, Nigeria, Angola, Colombia, and other sources of oil and gas. Elsewhere, imports fell by 22 percent from Brazil; 30 percent from Haiti; 34 percent -- excluding oil and gas -- from African Growth and Opportunity Act Beneficiaries; 15 percent from ASEAN members, with Indonesian trade falling fastest and Singapore holding up best; 17 percent from Pakistan and 20 percent from India; 19 percent from the European Union; and $9.8 billion or 20 percent from Canada and Mexico. More on the human side of this in a week or two.

Import-drop history -- Before the Second World War and the launch of international trade agreements, trade policy was more volatile than it has been since -- typically tariffs rose under Republican and Whig Party presidents and dropped under Democrats -- and trade flows likewise jumped up and down more violently than they do today. The seven biggest import-drops in American history were:

• 86 percent from 1811-1813, from $77 million to $22 million to $13 million. (British imposed blockade.)



• 70 percent from 1929-1933, from $4.4 billion to $1.3 billion. (Smoot-Hawley act high tariffs, Depression.)



• 59 percent in 1808, from $139 million to $57 million. (Jefferson closed ports.)



• 55 percent from 1818-1821. (World economic crisis, first protective tariff.)



• 47 percent from 1860-1862. (Civil War plus "Morrill tariff" increase)



• 46 percent in 1921. (Warren Harding's "Fordney-McCumber tariff increase, recession.)



• 36 percent in 1938. (Depression relapse, prelude to European war, Japan embargo.)

Recession history -- The National Bureau of Economic Research records recessions back to 1854. The deepest recession on record is the 43-month contraction between August 1929 and March 1933, which shrank the U.S. economy by 27 percent in real terms. The longest was a 65-month contraction of the 1870s which followed the collapse of the railroad bubble. Since World War II, the longest recessions were the 16-month crunches of 1973-1975 and 1980-82. The current recession began in December 2007; deepening as its 14th month begins, it seems likely to set an unwanted new record:
http://wwwdev.nber.org/cycles/cyclesmain.html