Saturday, October 26, 2019

Putting Federal Debt In Perspective Against those Responsible In The Future

Since 2007, US federal debt has risen 150% while annual US births (legal and otherwise) have fallen almost 14%.  Said otherwise, over the dozen years since 2007, federal debt has increased by $13.8 trillion while 5.2 million fewer births have occurred over the same period than the Census projected.  This is probably worth a little closer look.  Starting with...

US federal debt, split between publicly held debt and IG (Intra-Governmental holdings; aka Social Security trust fund, etc.).  Clearly, publicly held debt is skyrocketing since 2007 while IG growth is decelerating and will turn to net declines (as SS turns to a net seller) within the decade.  Relatively soon, all debt issued will be marketable and significantly more debt will be needed in order to pay for both the spiraling deficit alongside the declining IG holdings.


Next, looking at the annual issuance of federal debt, breaking out the annual issuance of publicly held marketable debt (red columns) versus IG (blue columns).  ***Noteworthy, since August 1st of 2019, the Treasury has issued $920 billion in net new debt through October 23rd.  The chart below is based on the assumption the Treasury will issue another $160 billion through the last two months plus the remainder of October (with a net issuance of $1.1 trillion for calendar year 2019).


Since debt is an obligation to be repaid or serviced in the future, I'll put this in context with federal debt continuously divided by the future, the quantity of annual births.  Below, annual births from 1950 through 2019 (blue columns) versus federal debt through 2019 (red line).  ***Yes, I'm making a great leap to note that births will continue to fall in 2019...as they have been falling at an accelerating rate through Q1 of 2019, as noted by the CDC (HERE).


Dividing federal debt by total annual births, from 1946 through 1975 (below).  As of 1946, coming out of a world war with debt at record levels, every child born had the future liability of $100,000 in federal debt.  By 1957, births had risen and federal debt had declined, meaning this responsibility per child born had declined by almost 40% to just $63,000.  Federal debt per child born wouldn't be back to the 1946 highwater mark until 1970.  But there would be no looking back after the abandonment of Bretton Woods and the foundation of the gold back dollar in 1971.


The then present generation (baby boomers) made a deal with the past generation to sell out the future generation (Millennials).  This can be seen in the chart below, showing the debt each child is born shackled with.  From $100 thousand in 1970, to $300 thousand in 1980, to $800 thousand in 1990, $2.1 million in 2007...and as of 2019, every child born a citizen of the US (regardless their parents status) is liable for a ludicrous $6.2 million in federal debt.  And this is just a fraction of the actual liability that is owed, if even faster rising unfunded liabilities were included.


To repeat, since 2007, total births have declined almost 14% versus a 150% increase in federal debt.  But we continue piling exponential debt on a declining future population and deride those who question the morality of such an obligation?  And the growth of the US child bearing population is rapidly decelerating while tumbling fertility rates are overwhelming the larger child bearing population (detailed HERE).  Translation, federal debt will continue skyrocketing while present and future births are likely to continue tumbling.

Of course, there is no way the US could ever repay this mounting debt even with a rising population of young...let alone a declining population of young.  But it is the "servicing" of the mounting debt that is destroying the Millennials and future generations.  The ZIRP, QE, etc. are effectively pushing asset prices through the roof with the follow through of record rents, day care, insurance, student debt, etc. etc. rising far faster than young adults income.

These policies of Federal Reserve driven asset appreciation primarily benefit asset holders, corporations, and those deeply indebted (federal government).  As detailed (HERE), the 70+ year-old population will represent an unprecedented 75% of the US population growth over the next two decades.  These policies meant to "kick the can down the generational road" continue to suffocate the asset poor young adults and restrict the creation of newborn.  The outcome of ever accelerating debt via perpetually lower rates (to zero and below)…is the resultant collapsing birth rates and the more the Fed and central banks will suggest even more of what is making the patient sick in the first place.

Wednesday, October 23, 2019

The Demographic Depression Will Overwhelm Central Bankers Over The Upcoming Decade

The decelerating growth and/or outright decline of the working age population is clearly visible in every part of the world. This article details where the deceleration began and the extent of the decelerations / declines. The reason this is so important is that the majority of economic growth is driven by the rising demand represented by the growth of the working age population (and their increasing quantity of employed persons). But not just the rise of any population, but those of means, those with savings, and those with access to credit.  This growth drives mega infrastructure projects, buildouts of supply chains, increased production, and ultimate rise in consumer demand. Absent that population growth (particularly among those with means) governments have been "building bridges to nowhere", "building ghost cities", providing "lower for longer", ZIRP, NIRP, and monetizing debt, etc. etc.  This is all ultimately a fools errand only worsening the ultimate reorganization.

Why?  The working age populations earn and spend about double of those on fixed incomes among the elderly populations.  The working age populations are at full employment and little to no further growth in employment is possible (detailed, HERE).  Elderly utilize little to no credit and focus on paying off their debts...thus despite low rates, money velocity will keep on tanking.  The declining interest rates, rising debt, and ever greater centrally controlled markets are the flip-side of the charts I show below.  The below charts all show the ten year change of the 20 to 65 year old population (and percentage change in that working age population divided by total working age population) versus the same for the 65+ year old populations.  Deceleration and outright decline are the universal among all the charts.

INDIVIDUAL NATIONS

JAPAN
  • 127 million or 1.6% global population
  • 3.4% global energy consumption
  • 2020-2030...Working age population decline of 6.5% (-4.5 million)
Patient zero in the epidemic of population collapse, Japan's negative fertility rates coupled with little to no immigration has Japan leading the race to the bottom. Only Japan's exports were able to offset the collapsing domestic demand.  Below, working age Japanese population versus the growth of the elderly population. Japan is entering it's third decade of working age population decline, declining slightly slower than the previous decade before the bottom really falls out from 2030 through 2050.

Percentage change, per 10 years, of working age population versus elderly population. Over the next decade, Japan's working age population will decline by 7% while its 65+ elderly population will increase by just 4%. Within 20 years, Japan's elderly population will cease growing and Japan's population will be in decline at all levels. But tellingly, Tokyo's population (representing about 30% of Japan's total population) is still rising meaning the working age population decline across the remainder of Japan's rural locations is of epic proportions. This collapse of working age across rural locations, as young head to urban centers in search of opportunity, is being mirrored across the rest of the world and is the final act of the economic decline worldwide.

GERMANY
  • 84 million or 1.1% global population
  • 2.1% global energy consumption
  • 2020-2030...Working age population decline of 8% (-4.2 million)
Just behind Japan in long term negative fertility but far more open to immigration, the working age German population versus the growth of the elderly population. Germany's creation of the Euro area was its means to avoid collapsing domestic demand for its exports by quintupling the market for its exports absent a strong Deutschmark. Of course, Germany's economic salvation has meant abject economic destruction for most of the Euro nations.

Percentage change, per 10 years, of working age versus elderly.

SOUTH KOREA
  • 51 million or 0.7% global population
  • 2.2% global energy consumption
  • 2020-2030...Working age population decline of -10% (-3 million)
The new poster child for population collapse is South Korea. Just like Japan and Germany, an incredibly urbanized and industrialized export powerhouse. Working age South Korea population change, per decade, versus the growth of the elderly population (below).

Korea's reliance on global exports is likely unmatched as their domestic population is now and will continue to collapse indefinitely. Below, the percentage change, per 10 years, of working age versus elderly is truly astounding.

CHINA
  • 1.43 billion or18.6% of global population
  • 24.3% global energy consumption
  • 2020-2030...Working age population decline of -8% (-69 million)
China is the elephant in the room with a collapsing working age population versus the gargantuan growth of its elderly population (below).  This chart is 20 to 60 year-olds and elderly 60+ year-olds, as China has compulsory retirement at age 60 for males, 55 for females.

Percentage change, per 10 years, of working age versus elderly.

THAILAND
  • 70 million or 1% of global population
  • 1% of global energy consumption
  • 2020-2030...Working age population decline of -5% (-2.1 million)
Working age Thai population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

MEXICO
  • 128 million or 1.7% of global population
  • 1.4% global energy demand
  • 2020-2030...Working age population of +12% (+9 million) but down from decade long peak of +38% (+13 million).  Growth remains through 2050 but only continuing to decelerate.
Working age Mexican population change per decade versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly.

IRAN
  • 83 million 1.1% global population
  • 1.7% energy consumption
  • 2020-2030...Working age population growth of +7% (+4 million)...working age growth is decelerating and will turn to depopulation prior to 2040.
Working age Iranian population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

BRAZIL
  • 211 million or 2.7% global population
  • 2.2% global energy consumption
  • 2020-2030...Working age population increase of +5% (+6 million) and this is essentially the last decade of working age growth in Brazil.
Working age Brazilian population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

INDIA
  • 1.37 billion or 17.7% global population
  • 5% global energy consumption
  • 2020-2030...Working age population growth of +14% (+110 million), decelerating from +30% and +137 million in earlier decades.  Working age growth continues decelerating through 2050.
Working age Indian population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).


REGIONS

East Asia (China, S/N Korea, Japan, Taiwan, Mongolia)
  • 1.67 billion or 22% of global population
  • 31% of total global energy consumption
  • 2020-2030...Working age depopulation of -8% (-80 million)
Working age (20 to 60 year-olds) East Asia population change, per ten years, versus the growth of the elderly population (60+ year-olds, below).

Percentage change, per 10 years, working age versus elderly (below).

WESTERN EUROPE
  • 455 million or 5.9% of global population
  • 12.5% total global energy consumption
  • 2020-2030...Working Age depopulation of -5% (-13 million)
Working age Western European population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

EASTERN EUROPE
  • 295 million or 3.8% of global population
  • 7.5% total global energy consumption
  • 2020-2030...Working age depopulation of -9% (-16 million)
Working age Eastern European population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

NORTH AMERICA+ (US of A / Canada + Australia / New Zealand)
  • 397 million or 5.1% of global population
  • 21% total global energy consumption
  • 2020-2030...Working age population growth of +1.9% (+4 million) down from decade long peak of +19% (+24 million)
US working age population growth over the coming decade is only 1.6% but the relatively higher #'s for Canada, Australia, and New Zealand push up the average (below).

Percentage change, per 10 years, of working age versus elderly (below).

SOUTH AMERICA
  • 427 million or 5.5% of global population
  • 3.3% global energy consumption
  • 2020-2030...Working age population of +7% (+19 million) down from decade long peak of +32% (+40 million)
Working age South American population change, per ten years, versus the growth of the elderly population (below).

Percentage change, per 10 years, of working age versus elderly (below).

Rest of World (the nations w/ incomes less than $4,000 per capita annually, and average $1,600 in per capita income)
  • 3.85 billion or 50% of global population
  • 20% of global energy consumption
  • 2020-2030...Working age population increase of +19% (+402 million) down from peak of +30% but at all-time high in total persons.
Working age population growth of Africa, Central America, Asia (excluding East Asia), etc. versus the growth of the same elderly populations (below).  The impressive looking population growth here simply does not transfer to any significant rising demand and consumption as these nations are too poor and too dependent on import growth among wealthier nations.  Sadly, these poor nations will only get poorer, following the current economic system.

Percentage change, per 10 years, of working age versus elderly (below).

Final Thoughts:
Over the coming decade, the current growth based system and paradigms will fall by the wayside.  The global trickle-down mantra is already failing, and will entirely come apart.  The impact will be bad for wealthy nations but even worse for poor nations.  The real question is what will replace the current faulty system...and will it be any better?  Invest accordingly.

-Population data from UN World Population Prospects 2019, (utilizing the overly optimistic Medium Variant).

Wednesday, October 16, 2019

America 2020 Through 2040...The Era Of The 80+ Year-Old

Summary
From 2020 through 2040, the 20+ year-old US population is estimated to grow by 15 million fewer than during the past 20 years.
Of that growth, 48% will be among 80+ year olds, 28% among 70 to 80 year olds, and just 28% among those aged 20-70 years old.
The implication for future employment is a drastic 70% deceleration of potential employment growth over the next two decades.
In a nation with twin trade deficits and budget deficits, the simplest of means to gauge potential growth, is to gauge the growth of the consuming population.  The chart below details the changing demographic picture in the United States.  According to UN and Census estimates, from 2020 to 2040, there will be little to no growth among the population of young (0-20yr/olds, green line) as I recently detailed How Low Will US Births Go?, likewise for the child-bearing population (20-40yr/olds, blue line).  Meanwhile the post childbearing but still working 40-70yr/olds (grey line) will rise but the largest population increases will be among the 70-80yr/olds (yellow line), and particularly among the 80+yr/olds (red line).  So what?
Breaking the above growth into twenty year periods by age segments and folding the 20 to 70 year-olds into one grouping, below, you can see how the next twenty years are nothing like the US has ever seen before.  The 70+ year old population will rise by 24 million versus just an increase of 9 million among the 20 to 70 year-old working age population.  However, even among the elderly, the bulk of the growth will be among the ultra-elderly 80+ year olds, representing nearly 50% of all total population growth over the next two decades.
Why do I mention this?  I just happen to catch this CLOWN on CNBC yesterday talking absolute nonsense.  The headline read, "Millennials are about to trigger a major ‘changeover point’ for the US economy, asset manager says".  Mr. Smead suggested if you "just do the math"...millennials are about to rock the US economy and...“In 20 years, there is going to be way more payers into the social security system and there is going to be way fewer taker-outers — and that problem will solve itself through demographics.”  Apparently, Mr. Smead had not done the math.  However, CNBC appeared to have no problem allowing his ignorant statements and hawking his services based on entirely erroneous statements.  Hmmm.
Why This Matters
Every age group has a general labor force participation rate (detailed by the BLS HERE), forming a bell curve, from low participation among 15 to 24 year-olds, peak participation among 35 to 44 year-olds, and collapsing among 65+ year-olds.  So, when there is minimal population growth among the working age populations, and those age groups that do all the work, are at historical peaks of employment to population size (chart below is employed per age group divided by population per age group)...and the bulk of population growth will be among those that typically don't work...well, we have a problem.
But participation rates among the elderly have been rising over the last decade (65 to 74yr/olds rising from 18% to 27% and estimated to rise to 32% by 2028, 75+yr/olds rising from 5% to 9% and estimated to rise to 12% by 2028).  So, if we want to gauge potential employment growth ("just do the math"), it is a simple exercise.  Multiply estimated population growth (not so hard, since in this case they are already alive and just shifting existing populations forward) by age groups and their participation rates...and the simple answer is that over the next twenty years, the maximum number of potential new employees the US can support is about 1/3rd any period since WWII.
This means, at best, over the next two decades the US will have just 1/3rd the potential growth of new home buyers, car buyers, tax payers, etc. etc. than anytime since WWII.  Myself nor this simple truth (as I have nothing to sell or buy, no "recommendations") are likely to make it on CNBC or any other "info-mercial" outlet.  This decelerating growth is why rates will continue declining (because they must), debt plus QE (and other forms of monetization to artificially boost asset prices) only become ever greater.  This ever growing substitution of centrally directed artificial growth for ever decelerating organic growth is "just the math" (as is the growing majority increasingly injured by the outcome and the shrinking minority enriched by the same).

Population data via US Census Population Projections and UN World Population Prospects 2019, Employment data via BLS.

Wednesday, October 9, 2019

How Low Will US Births Go?!?

Summary
Births in America continue to tumble despite a growing child bearing population.
The growth among the child bearing population is decelerating and this population will begin outright declines around 2029.
US births are likely to continue falling, faster and far deeper, while current Census estimates continue to anticipate growth (continually just around the corner).
The chart below is the 20 to 40 year old US population (blue line) and the columns are the annual change in that population (maroon columns).  The 1960 to 1990 population surge in the wake of the baby boom is easy to see as is the echo-boom from early 2005 through the 2020's.
From a births perspective, it doesn't matter what the total US population is...the only population that matters are those capable of child birth.  I show the 20 to 40 year US population as they are responsible for over 90% of the births while those under 20 and those over 40 are producing so few children relative to 20 to 40 year olds as to be statistical noise (births per thousand by age group is detailed by the CDC HERE...on CDC page, just click on age specific birthrates and hit generate chart to view age specific birthrates).
From 1957 through 2007, the child bearing population increased by 72% while births increased only 0.2% (just two tenths of 1%).  Obviously, it was the rise in the child bearing population offsetting the collapse in the fertility rate that maintained the flat birth rate.
  • 1957 through 2007
    • Child bearing population rose by 34.8 million (72% increase)
    • Annual births rose by 10 thousand (0.2% increase)
2007 through 2019 was the period that births were anticipated to spike with the rising echo-boom child bear population busily reproducing.  An echo baby-boom was anticipated.  Instead, a prolonged and deepening baby-bust has taken place.  According to the CDC, in the 1st quarter of 2019 births continued to plummet across the board, but I'm assuming 2019 births will come in slightly less negative through the remainder of 2019 (I'm likely overestimating 2019 actual births at 3.73 million).
  • 2007 through 2019
    • Child bearing population rose by +9.3 million (11.5% increase)
    • Annual births fell by <590> thousand (13.7% decrease)
The implications for what comes next should be obvious.
  • 2019 through 2029
    • Child bearing population estimated to rise "just" 3.2 million or a little over 3%
    • Births are likely to continue falling as deeply negative fertility rates overcome what little child bearing population growth remains
  • 2029 through 2040
    • Child bearing population estimated to fall 1.9 million
    • Births likely to fall even faster with a combined declining child bearing population and continued deeply negative fertility rates
Census birth estimates from 2000 (plus the nearly identical '08 estimate) and 2017 are displayed below.  Clearly, since 2008, the Census is having a hard time adequately curbing their enthusiastic projections.  Although each projection is lower than the last, each projection continues significantly overestimating births.  With decelerating growth among the child bearing population through the 2020's and outright child bearing population declines in the 2030's...there is no reason for birth projections to be rising but the Census is having a very hard time catching down to reality.  In truth, there is good reason to begin projecting ongoing and deepening birth declines in the 2020 Census estimate (my estimate at a realistic 2020 Census estimate is included below, blue dashed line).
From 2009 through 2019, actual births versus estimated births were 5.3 million fewer than anticipated (and this includes all births, whether the mother was here legally or otherwise).  This is a crack in present and future growth nearly five times larger than all Americans lost in all wars the US has ever fought!  That's 5.3 million Americans not in existence and not consuming the average $25,000 per/capita annually throughout their lifetimes.   But what is now a crack turns into a chasm, taking the same '08 birth estimate versus a more realistic birth estimate through 2040, this represents almost 34 million fewer births (-22%) than was estimated in 2000 and 2008.  The Census will be forced to continue collapsing their total US population projections, as they have been doing since 2008 (detailed HERE).  The implications for declining potential economic growth based on collapsing quantity of potential consumers (while productivity, innovation, and advancements continue increasing capacity...for a declining basis of consumption) should have the CBO and the like heads spinning.
A continuation of the current falling fertility and birth rates is a really, really good bet (chart below).
The age segment that will continue to grow rapidly, the post childbearing 45+ year old population (red line, below).  Notice even showing the broadest child bearing population (15 to 45 year-olds, yellow line), the stall in growth since 1990 relative to the growth of elderly.  Among the 45+ year-olds, the majority of population growth over the coming decade will be among 75+ year-olds, a segment with less than 10% labor force participation, consumes at very low relative levels, and utilizes little to no credit (nor should they, primarily living on fixed incomes).
The debt based US economic system premised on perpetual consumptive growth (as a dual net importer and net debtor) is now facing long term depopulation from the bottom-up while the numbers of elderly surge.  But only those who suggest this is likely to lead to some sort of "hiccup" are the crazy ones?!?
Population data via US Census Population Projections and UN World Population Prospects 2019

Friday, September 13, 2019

QE, Monetization; Just Symptoms. What Of The Disease?

Summary
This week, the Federal Reserve added another $6 billion to their Treasury holdings and maintained their MBS holdings.
Interestingly, Bank Excess Reserves held at the Federal Reserve continue to tumble, down by $25 billion this week.unmatched by balance sheet reductions.
Since QE ended, Bank Excess Reserves have fallen twice that of combined Fed Treasury and MBS holdings.this difference is direct monetization.
But all of these are just symptoms of a disease that is completely beyond central bankers; declining and decelerating growth among consumer populations that is incurable (but in truth, the disease is not the maturation of the world but our inability to accept it).
An update on the Fed's balance sheet (Treasuries and MBS plus bank excess reserves held at the Federal Reserve.  Charted below from 2008 through this week, are Fed held Treasuries (blue line), Fed held MBS (red line), and Bank Excess Reserves held at the Federal Reserve (green line).  As noted below, since QE ended, bank excess reserves held at the Fed have declined more than double the decline in the Fed's assets.
Federal Reserve held Treasuries (blue line) versus weekly change (black column) since September of 2017.  The deceleration of QT, the pivot, and restart of Treasury purchasing is easy to see.
Federal Reserve held MBS (mortgage backed securities, red line) versus weekly change (black column) since September of 2017.  The Fed has communicated that it will continue selling off MBS while purchasing Treasuries.
Banks excess reserves (green line) versus weekly change (black columns), since 2017.  Will the bank excess reserves held at the Federal Reserve continue declining now that Quantitative Tightening is over?  If so, that would be an ongoing flow of hot money.
Monetization
At the onset of QE, there was an initial mismatch of growth in the Fed's balance sheet versus bank excess reserves held at the Federal Reserve of about $800 billion. This mismatch remained from '08 to the end of QE in late 2014.  But since the end of QE, the excess reserves have fallen $700+ billion more than the Fed's balance sheet.  These excess reserves have left the Federal Reserve and returned to banks as cash.  If banks still do what banks do, this $700 billion since the end of QE would be levered anywhere from 2x to 10x in either loans or some sort of levered purchasing.  This is effectively $1.4 to $7 trillion in conjured money flowing into the economy and/or (more likely) assets.  The asset melt-up since the end of QE should not be a surprise.
A constant melt-up in asset prices flowing from ongoing monetization entering banks hands.  And if the Fed continues cutting rates (as I suspect they will), the lower IEOR (interest paid on excess reserves) should continue to push the remaining $1.3 trillion excess reserves out of the Fed and into the market.  So, the worse things get, the higher asset prices will go!?!
As long as this continues, it is hard to see how asset prices can do much but push higher...regardless the economy or main street or trade wars or whatever.  But all this is just a symptom of a incurable disease.  To see the disease, we have to look at the macro or macro...
The Disease...A Finite Population of Consumers Versus Economic / Financial System Premised on Infinite Growth
In our current system, the goal is growth. Growth on a quarter over quarter and year over year basis. The absence of growth is recession or depression. And this growth requires ever greater consumption (not just production) and consumption at prices that make the production of these things possible and profitable. The current economic, political, and social systems are dependent on this growth. But what if the basis of this growth has no basis? Or said more simply, the growth of the under 65 year old populations that does nearly all the work and nearly all the consumption are in secular decline.
The 0-65 year old population are the number by which credit and wage gains are multiplied...but when you have a negative numerator, funny things happen. And the decline is only gaining speed as the downward momentum is taking over.
For example, when trying to determine potential growth in consumption (not production, but consumption) the first number is how many more people will there be than the prior year...then how many more are employed, how much more did wages rise than real inflation, how much more debt did they undertake to achieve this consumption?  For decades, centuries, and really millennia, that first number has been a significantly positive digit. But looking at all the charts below, annual under 65 year old population growth has massively decelerated and outright turned to decline among the nations that consume 75% of global energy (and likewise, global exports).
In 2019, global under 65 year old population change is as follows versus each regions total global energy consumption...
  • East Asia -0.2% (-3.5 million)...31% of global consumption
  • Europe / N. America -0.1% (-1.2 million)...43% of global consumption
  • Central / South America +0.6% (+3.7 million)...5% of global consumption
  • Asia (excluding East Asia) +0.9% (+27 million)...17% of global consumption
  • Africa +2.4% (+31 million)...4% of global consumption
Why the focus on under 65 year-olds?  Income, spending, and labor force participation are a bell curve. Household income and expenditures more than double from early adulthood to peak earning, spending, labor force participation from age 45 to 54 years-old. From there, everything falls off and by age 75+, income and spending are nearly back to early adulthood levels but labor force participation falls to just 8%. The chart below details this in the US, and although the dollar amounts and participation rates vary, the dynamics are similar globally.  (BTW - easiest to think of the 55 to 64 year-olds as the go-go retirement years, the 65-74 year-olds as the slow-go retirement years, and the 75+ year-olds entering the no-go retirement years...with commensurate spending).
East Asia
East Asia (China, Japan, S+N Korea, Taiwan, Mongolia) has a total population of 1.67 billion and consumes about 31% of total global energy. In 2016, the under 65 year old population began declining and will decline by 0.2% in 2019. Through 2050, the East Asia under 65 year old population will continue shrinking by as much as 0.8% annually and is projected to decline by 280 million (almost a 20% decline in under 65 year-olds over the next three decades).  Meanwhile 65+ year old growth (a net liability and responsibility of the under 65 year old population) will continue growing through 2050 and is projected to increase by 225 million (a 105% increase).
East Asia 65+ elderly population is anticipated to grow by 225 million through 2050, but nearly 170 million of that growth is anticipated to be among the 75+ population.  Chart below is annual change (in millions) of "young-old" versus "old-old".
Europe / N. America
Asia's primary customers for their exports are Europe and N. America with a combined population of 1.1 billion (consuming 43% of global energy). The combined Europe / N. America under 65 year old population began declining in 2014 and will decline 0.1% in 2019 while the 65+ year old population will grow 0.4%. Europe / N. America's population trends will mirror East Asia's with persistent shrinkage of the under 65 year old population through 2050 (almost a decline of 75 million over the next three decades...and that assumes continued migrant inflows) versus persistent growth of the 65+ year old population (nearly 100 million more by 2050).
However, of the annual elderly population growth among Europe / N. America, over 75 million will be 75+ versus "just" 20 million more 65 to 75 year-olds.  Population growth among the "no-go" (low consumption) older retirees will be the dominant feature among the consumer nations of the world through 2050.
Central / South America (plus Caribbean)
As for the 670 million who inhabit the remainder of the Western hemisphere (who consume 5% of global energy), growth of the under 65 year old population is rapidly decelerating and anticipated to end before 2040. Growth of the 65+ year-olds is anticipated to mildly accelerate.
Asia (excluding East Asia)
As for the nearly 3 billion inhabiting the remainder of Asia who consume 17% of global energy (excluding East Asia), the annual under 65 year-old population growth has decelerated from a 2.4% annual peak in 1982 to 0.9% in 2019. Annual under 65 year old growth is anticipated to turn negative prior to 2050 and 65+ year old annual growth to gently move higher.
Africa
Africa with a population of 1.3 billion consumes just 4% of total global energy (and likewise global exports). Because Africa is so relatively poor, consumes relatively so little, and provides relatively few migrants outside of Africa...the population growth there is non-consequential from a global economic standpoint. Economically speaking; the world impacts Africa, Africa doesn't impact the world.
Conclusion:
When population growth among the consumer nations has turned to population decline, the consumers of 75% of total global energy (and likewise global exports) are turning to ZIRP, NIRP, and unrepayable debt loads to maintain an unreal, synthetically achieved rate of growth.  As population growth (and organic demand growth) is either declining or decelerating everywhere, why would economic activity be expected to rise?  Alas, the weaker the basis of economic activity, the greater the impetus to push interest rates into negative territory with the intent of mispricing bonds and asset prices in general.  Bad is the new good and we will only get worse so asset prices will only get better...until bad is really bad.
All population data via UN World Population Prospects 2019 and Fed Treasury Holdings via St. Louis FRED.

Tuesday, September 3, 2019

Employment In America, By The Raw Numbers

Summary
The age segments that make up the working age population are at levels typically associated with full employment.
The primary source of workforce slack over the past 50 years, females, are now experiencing declining percentages of employment.
With minimal working age population growth, full employment, no further female labor force slack; there is little further potential for labor force growth or resultant economic growth.
The BLS employment data makes a very simple statistic into an enigma wrapped in a question mark.  Being the simpleton I am, I'd prefer to see only two variables...the populations versus those employed.  No qualms about who is or isn't looking for work...no unemployed or not in labor force statistics.
This article will simply show the quantity of three separate age groupings divided by employees per each age grouping.  First, the young adult population versus employment among them (15 to 24 year-olds), then the same for the core (25 to 54 year-olds), and finishing up with those dreaming of retirement (55 to 64 year-olds).
Percentage of Total Populations Employed
The percentage of young adults employed (black line, below) peaks in 1973 and has been in secular decline since.  The employed percentage of the core population (blue line) rose until peaking in 2000 but has never regained that peak since.  The percentage of 55 to 64 year-olds (tan line) has essentially gone full circle, declining from the early '60's to a low in the mid '80's but rising since, presently at an all time high.
15 to 24 Year-Olds

The young adult population (tan line) and employed among them (blue line), rose sharply from the '50's until 1980, chart below.  Since 1980, the young adult population has been flat for four decades but those employed among them has continued to secularly decline.
But the young adult employed population of males versus females has shifted dramatically
  • The percentage of employed young adult males peaked in 1979 and has been declining since, now down to just 52%.
  • The percentage of employed young adult females was roughly half that of males in the early '60's but peaked in 1989 and has now come to match the male population.
  • The total quantity and percentage of both young adult males and females continue to move lower during each economic cycle since the late '80's.
25 to 54 Year Olds
Shifting to the core population (25 to 54 year olds) that drives the economy.  The core population, and employed among them, rose from the '60's until peaking in 2007...and since then the core population has risen less than a half million while those employed among them has fallen almost a half million.
Again, the core employed population of males versus females has shifted dramatically.
  • The percentage of core males employed peaked in the late '60's and has been declining since, now down to 86%.
  • The percentage of core females employed was less than half that of males in the early '60's but played catch-up for four decades, peaking in 2000.
  • Since 2000, the percentage of males and females employed has continued declining
  • The total quantity and percentage of both young adult males and females continue to move lower during each economic cycle since the late '80's.
55 to 64 Year Olds
From the '60's until mid '90's, the "soon to be retired" population was essentially flat and employment among them was even flatter.  However, since 1993, both the 55 to 64 year old population and employment among them has more than doubled.
Again, the "soon to be retired" employed population of males versus females has shifted dramatically.
  • The percentage of 55 to 64 males employed peaked in the '60's, declined until 1994, but has been rising since, now down up to 70%.
  • The percentage of 55 to 64 females employed was about one third that of males in the early '60's but played catch-up for five decades, peaking in 2008.  
  • Since 2008, the percentage of employed males has continued gently rising while the percentage of females has yet to regain the '08 peak.
Working Age Population Growth vs. Age Group Employment %'s
Below, from 1970 through 2009, the annual working age (15 to 64 year old) population growth (black line) vacillated from from +2.7 million to a low of 1.2 million.  However, since 2009, working age population growth has decelerated to just a half million.  This means once the millions of unemployed, thanks to the last great financial crisis, were re-employed there is only a maximum monthly increase of 40,000 new potential employees entering the workforce.
But the chart below shows the annual 15 to 64 year old population growth (black line) from 2019 through 2030 only continues decelerating...hitting a projected low in 2028 adding just 200 thousand annually (a maximum of just 17,000 potential new employees monthly).  And this is premised on high immigration rates, absent this, the annual working age population change will be negative.
The point is, with minimal population growth among the working age population over the next decade, full employment among the working age population by age segments and gender, there is minimal potential for further employment gains or resultant economic growth.  Further interest rate cuts and QE from the Federal Reserve plus federal government deficit spending are incapable of creating more potential persons to enter the workforce.  While these policies may (or may not, who really knows?) be capable of avoiding a fall in asset prices...real consumer based growth will be dependent on ever fewer consuming ever more...and sooner or later, there is a limit.