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
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
Phase 1 of Stock Market Correction - 11th Mar 19
Long Awaited Stock Market Pullback has Finally Arrived - 11th Mar 19
US Presidential Cycle and the Stock Market - Video - 11th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - 11th Mar 19
Chinese Economic Data Shakes the Global Stock Markets - 11th Mar 19
The Fed Is Playing a Dangerous Game - 11th Mar 19
The Stock Market Has Called the Fed’s Bluff, What’s Next? - 11th Mar 19
Turkey Holiday Bazaar Extreme Jewelry Price Haggling - Fethiye Market - 11th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

We Could See US Job Creation Fall off the Cliffs in the Months Ahead

Economics / Employment Jan 25, 2017 - 10:55 AM GMT

By: Harry_Dent

Economics Let’s do a quick thought experiment…

Imagine you’ve got two people in the workforce. Let’s say one is 40 and the other 65.

When both are gainfully employed, the unemployment rate is 0%. We’re enjoying full employment within the labor pool.


During the recession, the 40-year-old loses his job. With only two people in the labor pool, that means only half of the working age population that wants a job, has a job. Unemployment is at 50%. Ouch.

As the economy recovers, the 40-year-old once again finds work. However, he’s earning less than he was before.

Great news, sort of. The economy is once again at 100% employment and everyone cheers that the unemployment numbers saw such a major jump, even though average income is down.

But…

A few months later, the 65-year old retires. His departure, however, doesn’t create an unemployment level of 50%. Employment remains at 100%.

How’s that possible?

While it’s true that while the retiree is in the potential labor force, he’s choosing not to participate by retiring.  So the workforce has shrunk by one person, meaning that the remaining person is now the entire workforce. Seeing as he’s gainfully employed, everything looks rosy!

Only, is it really?  In our example, the economy will slow even though unemployment looks great.

Yes, I realize that I’m oversimplifying something much more complicated here. But my point (and warning) couldn’t be any clearer…

As the boomers leave the economy by the millions, even if we replace them, the workforce won’t grow substantially, and our economy will remain stuck in the ditch!

There is no way Trump will be able to achieve the 3% to 4% growth he’s promising because workforce growth is declining as baby boomers shuffle into their retirement years in staggering numbers, more than offsetting the millennial generation entry for several years.

All these fantastic unemployment numbers we’ve been seeing each month? They’re simply lipstick on a pig.

Workforce growth – from the natural forces of people entering at age 20 and exiting at age 63 on average – is in decline into the early 2020s. After that, it only grows slightly above zero, at best, for decades to follow.

Our productivity, what with the aging of our society, is back to 0.4%. That’s nearly as low as what it was near the top of the Bob Hope generation retirement cycle in 1983 and at the bottom of the spending wave back then.

And that’s the crux of our problem.

That right here is why it’s demographically impossible for Trump to succeed in stimulating 4% growth.

Sure, we’ve now moved to as low as 4.6% unemployment. That’s well into the full employment zone between 3.8% (2000) and 5.0% (1989) range. In the last peak in 2007, the unemployment rate hit a low of 4.4%, just below where we are now.



However, and this is a big one: We’ve simply hired back most of the workers we lost in the great recession! Those 150,000 to 200,000 monthly jobs numbers we keep seeing cannot last more than several months, at most. And when they suddenly drop to 50,000 (or less), that could be the shock that causes a sharp bubble crash of 30% to 40% into the fall.

Some economists would argue that there are still people that left the workforce that are no longer looking for work and we could draw them back in. I say good luck on that one. Look at this next chart. It shows that labor force participation peaked between 1998 and 2000 at 67% and has been falling ever since (note the inverted scale). This correlates directly with the rising retirement wave for the massive baby boom on a 63-year lag.



That high of 67% occurred just as the baby boomers were starting to retire and near the lowest unemployment rate of the entire boom at 3.8% ‑ no accident.

It doesn’t take a genius to get that rising retirees means lower labor force participation, especially when it predictably exceeds new entry by younger people.

This chart indicates that participation will fall to around 58% from the current level of 62.6%! This would occur into around 2024, which is the peak of the 63-year lag for baby boom retirement.

That’s another potential 4.6% loss of our workforce – or 0.58% per year over the next eight years – without a recession or depression. That’s 920,000 people a year just gone from the workforce! How do you offset that with lower taxes and who are you going to build these new infrastructures for? Not older people who need less of everything except health care… and nursing homes.

If we’re going to build new infrastructures, nursing homes should be it!

There is also another factor…

As two-worker households see their kids leave the nest, one will often choose to retire early or switch to part-time work. That has been a part of the drop-out rate thus far… These people aren’t coming back either.

So, here’s the reality. By sometime this summer or so, we could hit 4.4% or lower unemployment and then suddenly see job growth drop to 50,000, if not lower… with no obvious recessionary signs or economic crises at first.

How are the markets going to feel about Trump’s 4% growth revival then?

I smell the typical, first dramatic 2- to 3-month typical bubble crash of 30% to 40% when this happens, most likely between late July and late October of 2017.

How do you like them apples?

I still say Trump will likely be stumped or dumped by the end of this year.

Harry

http://economyandmarkets.com

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 © 2016 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 http://www.MarketOracle.co.uk - 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