Last week’s US jobs report contained some good news, but not very much:
• Employment inched up again to 136m. This is still below the 2007 peak of 139m – and never before has the number of jobs failed to rise over a 6 year period
• Equally, disposable income fell back in Q1 to $32.5k, below the 2008 peak of $33.8k. Income has always risen over a 5 year period since 1951
The reason is shown in the charts above of labor force participation rate, which measures the proportion of over-16s in work:
• The overall level (blue line) was only 63.4%. It rose steadily from 1973, but peaked at 67.3% in 2000 and is now back at 1979 levels
• The reason is that the women’s rate (red) went into long-term decline in 2000, after nearly doubling from 33% in 1948, and is now back at 1990 levels
The women’s rate is particularly important for consumer spending. This is because the rise in dual income households was a critical part of the demand SuperCycle from 1983 onwards, as the BabyBoomers reached the 25-54 peak consumption age range.
Women were then joining the workforce in record numbers, boosting consumer spending power. Their wage levels were also rising steadily relative to men due to the Equal Pay Act of 1963. But 2000 saw the trend come to an end, as this marked the moment when the oldest Boomers, those born in 1946, began to join the New Old 55+ group.
This is when spending becomes replacement based, as the the Boomers already own most of what they need, and the kids are leaving home. Equally they have to save more and spend less, due to their extra decade or more of life expectancy compared to previous generations. And since 2005, women’s earnings have plateaued at 80% of men’s.
Policymakers’ stimulus and liquidity programmes cannot do anything to reverse these critical trends. Even the Federal Reserve might therefore have to accept one day that it cannot magically turn low-spending 55-year-olds into high-spending 25-year-olds.