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GDP Contracts, Jobs Outlook Sours: Morici
CNBC.com | January 30, 2013 | 09:56 AM EST

The Commerce Department reported GDP fell 0.1 percent in the fourth quarter. Weak conditions abroad and flagging U.S. competitiveness caused exports to contract by $27 billion, and businesses anticipating a further slowdown slashed inventories by $40 billion.

Friday, forecasters expect the Labor Department to report the economy added 160,000 jobs in January; however, employment tends be a lagging indicator and flat or negative GDP growth will cause unemployment to rise sharply in the months ahead.

(Read More: Private Sector Adds More Jobs; Services Lead Way )

The tax and spending package implemented January first reduces prospects for improved growth and jobs creation, as the U.S. economy and workers continue to suffer from insufficient demand.

Factors contributing to weak demand and slow jobs growth include the huge trade deficits with China and other Asian exporters of manufactures and on oil. Absent U.S. policies to confront Asian governments about their purposefully undervalued currencies, and to develop more oil in the eastern Gulf, off the Atlantic and Pacific Coasts, and in Alaska, the trade deficit and its drain on growth will worsen.

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