Tuesday, February 06, 2018

Prime Working-Age Population At New Peak, First Time Since 2007

by Bill McBride on 2/06/2018 02:19:00 PM

Update through January: The U.S. prime working age population peaked in 2007, and bottomed at the end of 2012. As of January 2018, according to the BLS, for the first time since 2007, there are now more people in the 25 to 54 age group than in 2007.

Demographics is a key reason GDP growth has been slow over the last decade.

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. Here is a graph of the prime working age population (25 to 54 years old) from 1948 through January 2018.

Note: This is population, not work force.

Prime Working Age PopulatonClick on graph for larger image.

There was a huge surge in the prime working age population in the '70s, '80s and '90s.

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, '80s, or '90s we have to remember this difference in demographics (the '60s saw solid economic growth as near-prime age groups increased sharply).

The good news is the prime working age group should grow at 0.5% per year (depending on immigration policies), and this should boost economic activity.