Friday's weak US jobs report seemed to surprise most of those Wall Street analysts who are supposed to understand this key subject. The reason is that they ignore the major demographic changes now underway.
The chart above shows official US employment numbers since 1939 (blue column) and per capita disposable income since 1969 (red line), when records began. It highlights how employment patterns have changed over the past decade, whilst income levels have been flat since 2006.
In the past, the jobs market could be relied on to recover very quickly after a recession:
• In 1974/5, jobs declined from 78m to 77m, but were 80m in 1976
• In 1981/3, they fell from 91m to 90m, but were 94m in 1984
• In 1990/2, they fell from 109m to 108m, but were at 111m by 1993
But since 2001, the position has changed quite dramatically. April's jobs number at 133m was only 770k higher than in April 2001. Similarly, Q1's $32.6k disposable income was unchanged from Q4 2006.
This is the background to the blog's argument in 'Boom, Gloom and the New Normal' that the ageing of the Western BabyBoomers (those born between 1946-70) is creating major changes in demand patterns. The first Boomer became 55 in 2001, an age when people typically start to save more and spend less, as the kids have often left home.
Today, 29% of the Western world (272m people), are now in this New Old 55+ generation. And they are uncomfortably aware that they have to save more, and spend even less, as they now have to finance an extra decade or more of life expectancy, compared to previous generations.
But Wall Street simply doesn't care about this longer-term issue. Instead it encourages companies to cut jobs as demand slows. This further reduces overall incomes, just at the time when they are already under pressure, creating a vicious circle.