Thursday, November 22, 2018

Charts of the Day - Why, At Best, The Next Decade Will See Minimal Jobs Growth

Three variables below, per period, that highlight the simple restrictions to long term US economic growth:

1-change, per period, of the working age population (those aged 15 to 64 years old)

2-change, per period, of full time employees
3-change (increase), per period, in federal debt

The entirely predictable deceleration in population growth among the 15 to 64 year old working age population is set to go into overdrive during this next decade.  The working age population (which is already born and includes an estimated rate of immigration above and beyond the actual current rate of immigration) will grow at just 15% the peak pace it did in the 70's...and of course, without population growth and with full employment...you really can't have much jobs growth (particularly of the full time variety).  But in the place of that decelerating organic population and jobs growth has been (and will continue to be) the explosion in "synthetic growth" known as federal debt.

For those curious why I say the US is at "full employment", take a gander at the chart below showing the percentage of each portion of the working age population that is presently participating in the labor force (the lower % among the 15 to 24yr/olds is a long secular decline due to high secondary education participation...with all the student debt to show for it).  Every time we get to these levels of labor force participation, little further growth is possible and a recession beckons.
Of course, many will suggest that the 65+ year old population will step in for the minimal growth among the working age population.  However, the highlighted boxes in the chart below puts this argument to bed.  65 to 74 year olds have only a 27% labor force participation rate, and 75+ year olds a meager 8%...not to mention they make and spend half as much as they did in peak earning years.  They simply aren't likely to "bridge the gap".

One of those old chestnuts folks pull out is the number of jobs that need be created, given population growth, is something like 180 thousand monthly.  However, things change.  The chart below highlights the decelerating number of jobs that need be created (shown monthly, per period), given the slowing working age population growth to maintain "full employment".  Given the huge deceleration in growth among the working age population over the next decade, just one sixth the total number of jobs that were created in the 1970's will be necessary.  Given the US is now at full employment (regardless the quality of that employment), over the next decade the US should need only 30 thousand jobs monthly to maintain "full employment".
However, this means only 1/6th the number of potential new home buyers, new car buyers, new tax payers, etc., entering the US economy.  In lieu of this organic growth, get ready for a whole lot more "synthetic growth".


But of course, this isn't just a US or Japanese or EU...or even Chinese problem...it is entirely global.  Detailed here, End of Growth Among "Haves" Dooms Growth Among "Haves" & "Have Nots" Alike