Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

Children & Retirees: 7.5 Million Reasons Our Economy Isn’t Growing

Economics / Demographics Apr 21, 2015 - 03:28 PM GMT

By: Harry_Dent


Rodney Johnson writes: A few weeks ago my lovely wife and younger daughter, who is still in high school, traveled to Texas for a birthday party. It wasn’t just any party, it was the centennial celebration for my wife’s great aunt. 

More amazing than this lady’s longevity is the fact she’s not alone.  She and her two sisters (my wife’s grandmother and her two great aunts) all live together, ranging in age from 91 to 100.  We call it “the house of little old ladies.” 

Funny enough, despite their age and circumstances, these three women are considered part of the civilian non-institutional population, which is the potential labor force. In addition to these little old ladies, the definition also includes my high school-age daughter and her siblings, who are still in college.

That’s the odd thing about the potential labor force: It includes people who have no interest in working, at least not at this stage in their lives.

Per the Bureau of Labor Statistics (BLS), the civilian non-institutional population includes everyone living in the 50 states, plus the District of Columbia, who is 16 years of age or older. The exceptions are anyone active in the armed forces, or who reside in a hospital, prison, nursing facility, or other similar institution.

People who are working or looking for work make up the labor force.  Those who aren’t working and aren’t looking for work aren’t in the labor force.

The problem is that today, there are lots of people who aren’t participating.

In the mid-2000s the civilian labor force participation rate hovered around 66%. In late 2008 it began to fall, dropping to just under 63% by late 2013 before it stabilized. 

That may not seem like a big drop, but with roughly 250 million people in the civilian non-institutional population, each percentage point equates to 2.5 million people. That means that since late 2008, our economy has suffered not just the loss of productivity of those who are unemployed, but also the loss of those 7.5 million not participating in the labor force. 

Many analysts use this as an indication that our economy has a lot of slack labor. If only we created more jobs, then the missing 7.5 million would rejoin the labor force and help propel the economy to new heights! 

I don’t agree. I can’t think of anything that would convince the house of little old ladies to seek out gainful employment. Just as important, I can’t imagine what kind of jobs these pleasant but forgetful people who suffer ailments common to their age are qualified to perform. 

At the same time, I’m not about to push my kids out into the world a minute sooner than they have to be. I know they count as part of the labor force when they take part-time jobs to earn a little cash, but outside of those times, they drag down the labor force participation rate.

When the financial crisis drove up unemployment, many people went to college or back to college to gain skills that would help them compete in the jobs market. College enrollment jumped by 2.4 million people from 2008 through 2014.

While young and old students alike were considering what courses to take, the boomers had their eyes on the retirement door, also bringing the labor rate down. The number of people over 65 — the age by which point over 70% of people retire — increased by 5.5 million from 2008 through 2014. That number will continue to rise for at least another decade. 

For all the worry, the shrinking labor force participation rate doesn’t signal a catastrophe in the labor market. We can attribute most of the change to rising college attendance and the swelling ranks of retirees — both are natural and inevitable.

The good news is that the college kids will eventually join the labor force. The ones who graduate will likely be even more productive than they would have been without degrees, and earn more than their high school educated peers.

The bad news is that as our population of retirees grows, the nation must care for them as they cared for their predecessors, and this group typically doesn’t add a lot to productivity or consumption.

This will keep economic growth rates lower than they otherwise would be for some time. What’s more, it will also keep a lid on interest rates, because aging investors tend to focus on lower risk products like bonds and CDs. That will drive up demand for such investments… and also drive down their returns.

Rodney Johnson, Senior Editor of Economy & Markets

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2015 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules