by Bill McBride on 10/05/2015 04:44:00 PM
Monday, October 05, 2015
An update: Last year, I posted some demographic data for the U.S., see: Census Bureau: Largest 5-year Population Cohort is now the "20 to 24" Age Group, Decline in the Labor Force Participation Rate: Mostly Demographics and Long Term Trends, and The Future's so Bright ...
I pointed out that "even without the financial crisis we would have expected some slowdown in growth this decade (just based on demographics). The good news is that will change soon."
Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the "baby boomer" generation, the movement of younger cohorts into the prime working age is another key story in coming years. Here is a graph of the prime working age population (this is population, not the labor force) from 1948 through August 2015.
Click on graph for larger image.
The prime working age population peaked in 2007, and bottomed at the end of 2012. The prime working age population is almost back to the previous peak (this is population and has nothing to do cyclical weakness - this is just demographics).
The good news is the prime working age group is now growing at 0.5% per year - and this should boost economic activity a little going forward.
Note: There was a huge surge in the prime working age population in the '70s, '80s and '90s - and the prime age population has been mostly flat recently (even declined a little). The prime working age labor force grew even quicker than the population in the '70s and '80s due to the increase in participation of women. In fact, the prime working age labor force was increasing 3%+ per year in the '80s! So when we compare economic growth to the '70s, '80, or 90's we have to remember this difference in demographics (the '60s saw solid economic growth as near-prime age groups increased sharply).
See: Demographics and GDP: 2% is the new 4%