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Tuesday, April 7, 2015

Employment Train Wreck - An Economy that Needs Ever Fewer Workers and Simultaneously Needs Ever More Consumers?!?

Every month the Bureau of Labor Statistics comes out with it's employment report for the United States.  Last week I wrote a short report detailing the jobs situation (http://econimica.blogspot.com/2015/04/an-update-on-ongoing-us-job.html).  Still, most folks take a single data point, the 5.5% unemployment rate and presume the US labor market has made a full recovery since the '08-'09 recession.  However, determining the status of the labor market and economy deserves a little longer term view and better parsing to fairly determine which way we are headed.
 
From 2007 to 2015, Some quick take-a-ways...
  1. Total Population among the 25-54 year old American core fell 700k while 25-54 year olds with full-time jobs fell even faster, by 3.5 million.
  2. Total Population among 16-24 year olds increased by about 1 million, however, full-time jobs among this segment fell by 1.7 million despite the larger population.
  3. Although the US lost over a half million full-time jobs since 2007 despite the 19 million in total population growth, baby boomers generally maintained their full-time jobs as they moved into the 55+ and 65+ segments.  So, on a net basis, they were the only age segment to pick up full-time jobs (and 90% of population growth), adding 4.7 million full-time jobs and 17 million in total population.
    1. However, the 55+ segment collectively don't have adequate cash set aside to retire...so they keep on working and won't relinquish their positions.  Since the US isn't creating adequate job growth and the old continue to work (primarily to maintain benefits as the old run headlong into the broken US healthcare system)...this means the young college graduates (with record student loan debt) have no place to go to begin establishing careers.  The young only hope to service their debt (and pay their cell phone bills) at Starbucks, the Gap, etc..  The college grads are taking the jobs that would have previously gone to non-college grads...and group after group are pushing down opportunities for the next group.
  4. Population "growth" taking place in the US is not due to a rising birth rate or more children...it is simply a continued low birth rate boosted by a "death-dearth" among the older generations.  The old are living longer and making the US population appear larger than what will sustainably be maintained.  As the massive baby boom generation ultimately passes on over the next two decades coupled with continued low job creation enticing fewer immigrants, the US will almost surely go through a decade or two of declining population.  Read that sentence again if you are a home builder, home owner, lender for those pursuits...a factory owner, business owner, etc.  America's population will almost surely shrink, massive debt loads will be entirely unserviceable, leverage will unwind, and deflationary price spirals would be inevitable...all but for the central banks attempts to print massive quantities of money to buy (retire) assets to effectively rig everything and artificially goose asset prices... enriching the older asset owning population at the expense of the younger, indebted, labor deprived, non-asset owners.  Otherwise, the largest banks (represented by their ownership of the privately held Federal Reserve) would have massive losses on the bulk of real estate related assets.
Quick Period Comparisons:


Let's begin with side by side 15 year comparisons of US population and jobs growth, broken down by age segments.


Below, note the population growth since 2000 is not because of rising birth rates...the population growth is driven by 55+ year olds living much longer than any previous period.  So the US population growth is all about the baby boom "pig through the python".


The 55+ segment represents 74% of all population growth since '00. 

 
Source, BLS
And below a glance at employment growth over the same periods...all net full-time job gains have been in the 55+ population segment.  For the 25-54 year old segment responsible for family formation, home purchases, retirement savings, and funding their children's education, etc....the falling numbers of full-time jobs does not bode well.  For with a shrinking working class with even faster shrinking numbers of jobs...who (but central banks) will buy all the older generations assets now that their time to sell has come?

Source, BLS
Narrowing in on 2000 'til present below, the period is split into even comparative halves.  From '07 to present, nearly 90% of total population growth is in the 55+ segment.

Source, BLS
Below, the 25-54 year old working core of America has been decimated since the turn of the century and even worse since '07.  Jobs, particularly full-time jobs, have collapsed much faster than the declining population of this segment.  Again, the 55+ segment is maintaining it's jobs and effectively starving the generations behind them...ensuring these subsequent generations will not be capable of buying the boomers assets or paying the taxes to fund the massively under-funded boomer liabilities.
 

Source, BLS
Lastly, I highlight the impact of the boomer population departing the 25-54 working age segment of the US economy and the governmental response.


Population Source; OECD, Main Economic Indicators; Federal Debt Source, Dept. of Treasury
What I show is a multivariate problem including (but not limited to) demographically shifting jobs but also a national (and global) economy that, thanks to a multitude of productivity hiking innovations, needs an ever lower ratio of workers but also an ever higher ratio of consumers?!?  But obviously, how those without good jobs or jobs at all and without savings can be consumers is the question of our time.  The governmental and central banks have a singular response...print money.


I don't show this data to say we are doomed or point fingers at different groups.  Instead, I show the data to elevate where the problems exist and hope a constructive discussion can be had with better info than the single number highlighted as the BLS consensus "full employment recovery" meme.  Solutions do exist to this problem...but the problem must be made clear in order to begin the likely long and likely hard path to resolution.

7 comments:

  1. I've been thinking and debating this very problem for years and I can't see a way out of it.
    I think you've written a clear, concise, well-supported piece here and I have no disagreements with it except this: "Solutions do exist to this problem..."
    Name one.

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    Replies
    1. Thanks and regarding solutions...I do believe this problem of massive un-repayable debt, inadequate jobs creation, financialization, etc. all have solutions. However the solutions require painful restructuring of economies, governments, and nations. For instance, the $100 trillion in US debt and unfunded liabilities must be "restructured" in a bankruptcy. Debt that can't be honestly repaid must be written off...and that is a lot of short and medium term pain (and potential risk of a societal meltdown). The casino that Wall St. has turned into and ridiculous levels of leverage must be shut down. Again, that's a lot of pain and resistance.
      Every problem has a solution...no matter how distasteful but like a drunk, I suppose we have to hit rock bottom before we'll either acknowledge we have a problem or implement any durable solutions.

      Delete
    2. Have you ever considered that the underlying premise of the producer/consumer economy, based on the labor/wage model, is a product of the industrial revolution, and, as such, is no longer relevant to our times? The industrial age is over, the institutions that rose up around it have had their time, and that time has passed. These institutions, although firmly entrenched, are dinosaurs. Their money and power allow them to continue to defy the only inevitable force in the universe...change. This state of affairs will not continue forever, or even for very much longer, I believe. My great hope is that the evolution of our culture toward a higher and more civilized form will be a peaceful one, although my expectations are somewhat less optimistic.
      I hope to see more of your writing on this theme and other related topics in the near future.

      Delete
  2. Yet when the crap comes all down there will be no accountability and no one going to prison to only repeat the same process again .The same people will be behind the curtain and the same suckers will be taken for yet another shake down .

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  3. The Titanic has hit the burg. The rate at which it sinks will accelerate with time. There will be a total collapse of western living standards, and war will ensue.

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  4. I believe that several corrective steps need to be taken. First of all our great leaders have allowed the Wall Street casino guys to change bankings purpose from growing an economy via business/new product development to one where money goes into the fast profit-which never puts money back into Main Street;s pockets. This misallocation that is being allowed (thanks Bill Clinton) has starved Mainstreet and the middle class. If the middle class is not healthy, we have no support system for social security or other justified state/federal programs. Allowing this to happen just enriches the 1-2% and the rest of us languish. I am conservative but not convinced that the wealthy create jobs. I believe small business does. From this priority I believe we do need to restructure our governments (smaller) and scale back the IRS. We do not need a police state for political parties to misuse. American business needs to be freed from taxation to o what we do best. The last major area that needs reform is our politics & morality. This country is no longer driven by a majority. We have been led to believe that these far left social initiatives have majority support. This is not true. The media & politics have to be separated somehow and the middle class/taxpaying public need to take back our country. Look what we have done to pour country these past 30 years. We have forgotten how to be involved because we are too busy and in pursuit of our selves and our conveniences. Too many people in this country have no idea or inclination about who our leaders are and what they are up to. Furthermore, we are too into ourselves to care. In the end we are getting what we asked for. Maybe we all have to lose everything before we realize that we need to be involved and take back our families and country. Minority special interests being given majority rule are destroying our country. As a country we have given up our leadership role in the world via all of the foolish trade deals both parties have supported.

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  5. What effect has Obama requiring businesses pay for his healthcare for all program had on overall hiring? I believe many hours were cut or full time positions broken into several p/t offerings. Given the costs involved, it is doubtful the businesses would embrace that cost if the economy was booming!

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