Thursday, April 20, 2017

More Silly Demographic Stuff...Or Why the US Economy Is Never Returning to "Normal"

I'm going to start with a shockingly obvious statement...household income and expenditures start low, ramp up, peak during the 45-54yr/old portion of our lives, and then recede as we age.  I'm pretty sure nearly everyone understands this...except the Federal Reserve.  The chart below highlights the impact over our lives (data via BLS).

As the chart above details, the 35-54yr/old segments have the highest incomes and it follows they do the greatest share of the spending...but what isn't shown but also important is that the 35-54yr/old group also takes out the greatest portion of credit.

The chart below should be of interest to the Federal Reserve.  It is total employment broken down by age groups since 1950.  Note that as the boomers made their way through the economy, employment among each age segment rose rapidly, peaked, and once the boomers exited went into decades of decline.  The 55+ segment is the boomers last stop and their peak impact on employment among the 55+ is dead ahead.  The best the economy can hope for over the next couple decades is to equal or ever so slightly surpass the boomer employment peaks set decades ago but innovation, automation, slowing population growth, and so many more factors likely will not support this.
Note that since '00, nearly all US job growth has come among the 55+yr/old segment of the population...the portion whose income, expenditures (and utilization of credit) are receding.  Further, about a third of this growth is among the 65+yr/olds and this will be ramping up over the next decade.
To sum the chart above, job gains since '00 came among the two groups with the lowest income and spending capabilities while those at the peak of their earnings / spending have outright declined:
  • 25-34yr/olds +2.6 million employees
  • 35-54yr/olds <-2.4> million employees
  • 55+yr/olds +17 million employees (again, best guess is about a fifth of this came among the 65+yr/olds)
The chart below shows the change in the number of households from '00 through '15 per age group and change in household income over that period (change in 2015 dollars).  As above, all growth is among the 55+yr/old segment.
The chart below shows job gains from 2008 through March 2017:
  • 25-34yr/olds +2.9 million employees
  • 35-54yr/olds <-4.6> million employees
  • 55+yr/olds +8.6 million employees (best guess again, nearly a third of this came among the 65+yr/olds)
And again in the chart below, the changes in number of households and income.  Household growth is among the 65+yr/olds and nearly all income growth also among the 65+yr/olds.  How the Fed can't understand why consumers aren't consuming like "normal" is pretty amazing.

Among those who earn and spend at the fastest rates (35-54yr/olds in the chart below) the rapid growth in employees from 1980 to 2000 is plain to see, nearly doubling the working population in that time.  But since 2000, everything has changed.  In particular, the declines since 2008 among the most economically important segment are like nothing seen in our lifetime: 
  • <-4.6> million employees
  • <-2.4> million households
  • <-$600> hundred annual income

So, the only answer is cheaper debt and more debt and the chart below details the rise of federal debt (marketable) per 25-54yr/old employee since 1970.  Each of the 98+ million employed 25-54yr/olds "only" owe $147,000 (in addition to their annual taxes) to settle America's affairs.  Their bill has nearly tripled in the nine years since 2008 but unfortunately their income has done nothing of the sort.

Extra Credit:
For those curious to know what's around the corner, check the 15-40yr/old child bearing US population (which has been minimally growing since 1986) and the continuing negative and decelerating birth rates among that population.
The US won't be getting back to "normal" growth anytime soon...and "normal" never was normal to begin with.