Follow Up: The working population only increases 90K/month, not 150K

[cthulu2016]

Last edited Mon Oct 8, 2012, 01:51 PM - Edit history (1)

For several decades (1960s, 1970s, 1980s) the American workforce grew at 2.1%/year. That was the baby boom population bulge entering the workforce.

To grow jobs today to keep up with 2.1% working population growth requires about 125,000-150,000 new jobs/month. (That tics up slightly as the overall population increases.)

Every middle-aged person who ever took economics or studied policy received that 150,000 rule of thumb. People teaching economics and policy grew up with that number. Newspaper print that number in analysis today, commentators operate with that number.

I am among that group. I have always accepted that the needed baseline of job growth was somewhere in the 125K-150K range.

But according to the CBO, the roll-over of the baby boomers has reduced the workforce population growth from 2.1%/year to only 0.8%/year.

This is a very notable thing.

The labor force has increased by about 0.8 percent per year, on average, over the past decade. That rate of growth is less than the annual rate of 1.2 percent in the 1990s and much lower than the 2.1 percent rate exhibited over the three decades before that (see figure below). Although the U.S. population has grown by about 1.1 percent per year over the past 10 years, the labor force participation rate (the percentage of the civilian noninstitutional population age 16 years or older who are either working or actively seeking work) has declined, reversing a long-term upward trend.

http://www.cbo.gov/publication/22011

Two days ago Paul Krugman tossed off, like it was no big controversy, that the current labor force replacement rate the CBO uses is about 90,000/month, not 150,000.

This is substantially more than the number of jobs we need to keep up with population growth, which is currently something like 90,000 a month. (The number used to be higher, but baby boomers are getting old — the same thing that affects the household survey.)

http://krugman.blogs.nytimes.com/2012/10/07/the-payroll-data/

This is the link he gave, which is a little weak. I did the CBO population research on my own because I wanted to check out the 90K figure.)
http://www.cepr.net/index.php/blogs/beat-the-press/we-need-90000-jobs-per-month-to-keep-pace-with-the-growth-of-the-population

Is that credible?

This is my back-of-the-envelope math, just to show the general concept. Using round numbers, if the workforce grew at 2%/year 1960-1990 and at 1%/year from 1990-2012, the rules of thumb of the baseline of jobs we need every month is much lower than it was. One-half of the old number, adjusted upward somewhat for the growth in population. (1% of 300 million is 3 million. 2% of 250 million 5 million.)

If the number of new jobs needed very month to stay in the same place is 3/5 of what it was in 1980 then that makes 150K into 90K.

And if that is the case then we have been in a very real jobs recovery for some time, as reflected by the household survey. 60,000 more growth jobs every month more than we thought.

Since TV and print financial commentators (right and left) still use 125K-150K every day talking about the jobs picture, this is a big deal, if correct.

I doubt it's quite as low as 90K. Even Krugmman said "somewhere around."

Call it 100,000 jobs/month needed. That still means there has been substansial job growth, month after month, above the replacement level.

[font color=red]So if anyone has good links about the CBO population-growth jobs baseline assumption of 90K, or 110K or any number, please post it.[/font color]

I posted yesterday about this, in it includes more information: http://www.democraticunderground.com/10021489915

[Agnosticsherbet]

1. I did not know that...

Thanks, really. I learned something great from this.

Like a lot of people, I have sued that statistic without thinking about where it came from. I will keep this bit of data to reuse in the future.

[pnwmom]

2. Very interesting. Thank you! n/t

[cthulu2016]

3. .

[cthulu2016]

4. .

[cthulu2016]

5. -