The US population reached 320m this year, an 11.35m increase versus 2010, according to the US Census Bureau:
“The U.S. is expected to experience a birth every 8 seconds and one death every 12 seconds, whilst net international migration is expected to add one person to the U.S. population every 33 seconds. All these factors mean a net gain of one person every 16 seconds to the U.S. population”.
Over the same period, the number of working age people has also grown, from 237.8m in 2010 to 250.3m last month. Yet sadly, the percentage of people in employment has fallen, according to Bureau of Labor Studies data, as the chart shows:
- 64.6% of the working age population were working in January 2010, versus 62.6% last month (black line)
- 70.9% of men were working then, versus 69% last month (blue)
- 58.7% of women were working then, versus 56.6% last month (red)
These rates are also slightly lower since November, when I last analysed the jobs market. So it is puzzling, to say the least, that most reporting of the US job market currently suggests it is steadily improving . Jobs are certainly being created, but not in sufficient numbers to maintain spending power and thus revive economic growth.
A simple calculation highlights the issue:
- Another 5.1m people would be working today, if the economy still had the same percentage of employed people as in January 2010 – 2.3m men, and 2.8m women
- This would provide major support for the economy, with median male earnings at $895/week in Q1 2015, and median female earnings at $730/week
Clearly the US, like other Western nations, needs to find a solution to this problem. But unfortunately it is currently using the wrong tools. Common sense, as well as the experience of the past 6 years, tells us that it is impossible for the Federal Reserve to create jobs in today’s economy via the use of monetary policy:
- One major problem today, for example, is that only 47% of those without a high school diploma have jobs
- This is far below the 75% employment rate of those with bachelor’s degrees
- Data for Black and Hispanic employment shows similar gulfs versus White employment rates
How can printing money change these fundamental causes of unemployment?
Hopefully next year’s Presidential election will include debate on this critical issue. Otherwise, on current trends, the US will have suffered a further 2% decline in participation rates by 2020, when the 45th President comes to the end of his/her term in 2020.