Trade deficit surges despite export growth

The U.S. trade gap has hit a 16-month high, the job market is shrinking and exports -- a rare item in the economy’s plus column lately -- may slow.

They are signs that the economy may be deteriorating further, analysts and business leaders said Thursday, which could intensify the political debate on how to fix the problems less than 60 days before Americans choose a new president.

The U.S. trade deficit soared in July, the Commerce Department said, as oil imports hit an all-time high. Although exports increased, economists expect that slowing economies in Europe and Asia will reduce export growth later this year.

The Labor Department also reported that new applications for unemployment benefits fell less than expected last week as the struggling economy continued to take a toll on workers.

And in a sign the job market could get worse, nearly one-third of the country’s chief executives expect to cut payrolls in the coming months, according to a survey released Thursday by the Business Roundtable, an association of CEOs at large companies.

Economists welcomed the continued strength in exports, which have been the primary driver of the U.S. economy in a year when the country has been battered by a prolonged slump in housing, rising unemployment and a severe credit crunch.

“There is no question that exports are driving our economy,” Commerce Secretary Carlos M. Gutierrez said.

But David Resler, chief economist at Nomura Securities, said that export growth “underscores a new vulnerability” for the economy as overseas growth “appears to be slowing abruptly.”

Many analysts expect rising unemployment to further crimp consumer spending and slow growth enough to cause the economy to contract in the fourth quarter and next year’s first quarter -- the classic definition of a recession.

The waning effects of the government’s $168-billion stimulus package are expected to exacerbate the problem.

Data released by the Labor Department indicated that the layoffs were continuing.

New jobless benefit claims dropped to a seasonally adjusted 445,000, down by 6,000 from the prior week but above analysts’ expectations of 440,000.

The number of people continuing to draw jobless benefits increased to a five-year high of 3.53 million.

The July gap between imports and exports rose 5.7% to $62.2 billion, the Commerce Department said, much worse than the $58.8-billion trade deficit that Wall Street economists expected.

Oil prices rose to record levels of $147 a barrel in July, pushing America’s foreign oil bill to an all-time high of $51.4 billion.

The big rise in oil prices offset another strong showing for U.S. exports, which rose by 3.3% to a record $168.1 billion.