patrick.net

YesYNot says

This seems to me to be great evidence that increased borrowing costs slow down demand.

It's utterly bizarre why this is even being debated.

The core miscommunication here is an expectation of late 1970s, late 80s, or late 90s style job market heat-up.

While there is an obvious pattern there, one needs to understand WHY these booms came as they did.

I think the 1970s was a bona-fide productivity boom, driven by the baby boom, women, and available opportunities.

The 1980s continued this but started the divergence of total debt vs. GDP.

Total Credit Money Owed (blue) vs nominal GDP (red)

Plus lower nominal oil prices 1985-1995 didn't hurt.

The 1990s featured the front-side benefits of our burgeoning trade imbalance, largely with China:

http://research.stlouisfed.org/fred2/series/BOPGTB

So yeah, if we get a job boom like previous decades:

Job growth in 5 year periods:
1970-1975: +8.6%
1975-1980: +17.5%
1980-1985: +6.1%
1985-1990: +13.3%
1990-1995: +6.6%
1995-2000: +12.4%
2000-2005: +1.3%
2005-2010: -2.4%

we'll see home inflation like those hot periods (1975, 1985, 1995).

Right now we're at the same number of jobs we had back in 1999, so any growth now is just bailing out the boat.

However, debt -- per the graph above -- has shot off the chart.

And now we've got 80 million baby boomers ready to enjoy their trillions of government cheese they've been promised.

This is not going to end well.

Here's a chart I like to make about population pyramids . . . you can easily compare certain years since the additive blend of their year cohorts turns gray thanks to the bar being complementary colors.

With this chart solid color is new additions to each 5 year group, 2020 vs 2003.

Eg. in 2020 we will have about 3 million more people age 80+ in 2020 compared to 2003.

You can really see the baby boom hit the 55-75 bins, too. Roughly 18M more people up there by 2020.

This is the demographic trend we're looking at. Inflation is not going to solve it.

Curiously, people in their 40s will fall by 4M people in 2020. I don't know what this means.

fwiw, here's the Japanese comparison, 2003 vs 2020:

It's kinda unclear but other than the seniors, only the 40-49 cohort is larger in 2020 than 2003.

The age 25-35 cohort is going to be missing ~8 million people!

I don't know if the Japanese pyramid is a lot worse or a lot better than ours.

The number of old people 80+ doubling from 5.5M to 11M is something, but I don't see why their unemployment problem won't go away later this decade.

Except for people in industries that cater to young adults I guess. That cohort is just disappearing.

Troy,

The charts are interesting.

When I look at it [and make the assumption that boomers will be retiring at "normal" ages], it appears that we will be removing far more people from the labor force than we are adding. (The yellow part of the 65-69 bar is much larger than the blue part of the 20-24 bar)....so, with time, our unemployment situation will get some help, I imagine. I think Japan is going to be hurting pretty bad over the next 3 decades or so -- especially if people just keep getting older instead of dying. :)