The Imminent Hard Stop

Tuesday, September 18, 2018
By Paul Martin

by Chris Hamilton via Econimica blog,
Tue, 09/18/2018

There is an imminent hard stop to jobs growth in the US and therefore a concomitant problem to growth in consumption and economic activity. The hard stop is simply the outcome of fast growth in employment versus fast decelerating population growth among the potential labor force… resulting in a labor participation rate that will peak as soon as 2019 or as late as early 2020. And like night follows day, recession will ensue as soon as employment growth abates.

The US labor force participation rate amid 25 to 64 year olds, at midyear 2018, was 75.2%. In the post 1980 period (since women have entered the workforce en masse), peak labor force participation rates have been somewhere between 76% to 78% (highlighted in the chart below). At that point, essentially all those capable and/or willing to work are employed. The remaining quarter of the 25 to 64 year old population are busy with parenting, caregiving, extended schooling, early retirement, incarcerated, on disability, face skills mismatches, or suffer physical or mental challenges that make work unlikely or impossible. Simply said, if jobs continue growing anywhere near the current pace, by the end of 2019, the labor force will simply not be capable of providing further growth.

If the US population is still growing, why isn’t the potential labor force able to provide the labor for a growing economy? The chart below shows the annual growth of the 15+ year old US population, from 1951 to 2028, through the next decade. The black boxes with yellow numerals show the total 15+ year old population growth double peaking at +2.9 million persons annually in 1975 and 1998, decelerating to +2.7 million in 2008, and now down to +2.1 million in 2018. But the bigger story is the demographic that makes up all the growth, shifting from the blue columns representing growth among the 15 to 64 year old population to the 65+ year old population.

The Rest…HERE

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