by Chris Hamilton
Economists spend inordinate time gauging the business cycle that they believe drives the US economy. However, running in the background (and nearly entirely forgotten) is the population cycle. The positive population cycle is such a long running macro trend thousands of years in the making that it is presently taken for granted. It is assumed that upon every business cycle downturn, the positive growth of the population cycle (along with accommodative monetary and fiscal policies) will ultimately spur greater demand and restart the business cycle once the excess capacity and inventories are drawn down. However, I will show that the population cycle is now, running in reverse and that America (nor the world) will emerge from the next recession…instead it will morph into an unending downward cycle…contrary to all human experience.
The 25-54yr/old US population peaked in December 2007 and remains below that peak since (this population is presently about 400k fewer than Dec of ’07). However, total US full time employment is now 3.6 million above the previous peak in 2007. This is 1:1 with the 25-54 population…just as it was in 1980 and 1970.
Annual change in 25-54yr/old US population vs. annual change in total full time US employees (below). The macro population cycle is plain vs the more frequent gyrations of the micro business cycles.
And below, the change per 8 year periods of the 25-54yr/old population and total US full time employment. About as correlated as it gets..
And so, since population growth means so much…two differing views on where this population is headed. In red, the Census and in black, an unbiased view of the child bearing population, birth rates, and current and future immigration trends.
But if we widen out to the 15-64yr/old population vs. US full time employees…the chart below details both sets below.
Again, the chart below taking the 8 year changes in the wider 15-64yr/old US population vs. full time employment.
Charting the change in the core population of the US vs. full time employment. During each downturn in full time employment, the growth in the core population continued and eventually pulled the business cycle to a fresh start. However, as the population cycle slowed the downturns were deeper and recoveries slower due to minimal growth in demand from the population cycle.
Below, focusing from the turn of the century ’til now, the downtrend of core population growth is very plain and the negative impact on the business cycle should also be easily understood. The expected Federal Reserve response is of course interest rate cuts to incent record quantities of new debt…to maintain the unsustainable present.
Anyway, the chart above makes it plain that the population cycle of the broad core of the US (and in fact, that of the 0-64yr/old population) is now on the precipice of turning Japanese…also known as depopulating (see chart below).
The next business cycle recession will be unending and is very likely to run years into decades and perhaps a century or more. A declining population already indebted with record debt and zero interest rates will consume less…meaning overcapacity and excess inventories will never be fully cleared before the next downturn…and on and on and on.
But this isn’t a US issue…this is a global problem. The annual growth of the 0-64yr/old population of the combined OECD nations (most the EU, US, Canada, Mexico, Chile, Japan, S. Korea, Australia / New Zealand) plus China, Brazil, and Russia show the growth that has driven nearly all economic growth has come to an end…and begins declining from here on. And when importers are shrinking, exporters have no one to export to…and on and on and on.
This is the SHTF scenario.
by Chris Hamilton