The decline in the labor force participation rate appears to have stabilized at a level close to that of the late s, while productivity for the last decade is the lowest since record-keeping began in This was labor force participation, represented in the chart by the green line. Birth rates tend to be loosely, but positively, correlated with economic growth rising during good times and falling when growth goes south. Or even farther down the road, in But they do matter for the bigger picture, which is why every now and then they will show up in one of our weekly commentaries. Right now, all three of these variables are either negative or stagnant, which puts a big asterisk next to that longevity record for the current recovery. As the chart shows, the average rate of productivity the thin blue vertical columns was substantially higher during this period than it has been at any time since. The first was the remarkable burst of productivity that came in the immediate postwar era.
But they do matter for the bigger picture, which is why every now and then they will show up in one of our weekly commentaries. Maybe some other metric will matter more to them…and to us, in our advanced years. But that may be simply a matter of time. Then, another productivity boom though less impressive than that of the ss happened in the late s and early s, this one driven mostly by the delayed impact of information technology in the office and new business processes, like just-in-time inventory management and enterprise resource management, that made efficient use of all that new computational capacity. Alexa, Make the Economy Grow Which brings us to today. The chart below shows the long term trends since for productivity and labor force participation. The US birthrate reached a 30 year low in In the meantime, though, a healthy dose of productivity would be a nice antidote to those baby blues. As for labor force participation, we have some clues in those population trends we observed in the opening paragraph of this commentary; namely, the US population is ageing and the fertility rate is moving farther away from the replacement rate where each new generation has enough children to replace the outgoing generation. If our kids and their kids are looking at this chart and remarking on the great growth cycle of the s, it will be due to a new wave of productivity that we have not yet seen but that may well be lurking under the surface. Imagine for a moment that you are looking at the above chart in , twelve years from now. And while there may not be much we can do about broad population trends, what is it going to take to bring back higher productivity? But another trend kicked in around the same time that kept the growth going. Population growth is one part of the long term economic growth equation, along with labor force participation and productivity. Or even farther down the road, in We are not likely to see another phenomenon akin to the sudden surge of two-income households in the s and s to boost participation rates. Right now, all three of these variables are either negative or stagnant, which puts a big asterisk next to that longevity record for the current recovery. The fertility rate has fallen from 2. The baby boom generation started to enter the workforce, and so did women, heralding the arrival of the two income household as mainstream. This was the heyday of Pax Americana, when our factories and the goods they produced were the envy of the world. MV Weekly Market Flash: What will it look like? Birth rates tend to be loosely, but positively, correlated with economic growth rising during good times and falling when growth goes south. Artificial intelligence, immersion reality, quantum computing…these are technologies that are known but that have not yet shown themselves to translate to economic growth. The decline in the labor force participation rate appears to have stabilized at a level close to that of the late s, while productivity for the last decade is the lowest since record-keeping began in What good is an expansion if the rate of expansion is, by historical standards, so low?
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