Friday, September 20, 2013

Not Enough Economic Growth to Go Around

Since it is forced discipline and regimen month, I am up.  And one of the annoying nagging things in the back of my head was this score of posts and economic ideas I've had that I just plan didn't have the waking hours to attend to previously.  But now since "we work until there is no more work to be done or we fall asleep trying" I'm knocking this one off the "to do list."

Follow me in on this because it takes a little bit of explaining.

All standards of living comes from economic growth.  And in the ideal world the economy would be growing faster than the population. This excess growth would result in higher GDP's per capita or higher "wealth."  However, it is not the entire population that produces the economy growth.  You have children and retirees and, don't forget people who just don't want to work god bless 'em!  So you look at the "labor force" which are those "willing and able" to work whether employed or not.

However, I was a bit cynical.  I believe if it weren't for women entering the labor force, there would be fewer and fewer abled bodied people working as a percent of the total (which is true).  Also, women are also leaving the labor force, resulting in a very quick drop in the labor force participation rate since this Great Recession began.  So to simplify things (as well as account for laziness) I dispensed with the concept of "labor force participation" and just looked at "working age population" i.e.-the people who should be working in relation to the amount of economic growth.

In short, I wanted to see if the economy was growing at a rate faster than the employable population and if so;

GOOD!  Because that means higher wages and higher standards of living

and if not

BAD!!! Because that means stagnating or decreasing standards of living and wages.

Thus the "GDP Minus Working Age Population Growth Rate Premium."

In short I took the annual growth rate of the economy and subtracted out from that the growth rate in the working age population.  But because economic growth is chaotic, I did my patented, "Let's smooth things out over a rolling 10 year average."  The results were thus:

It's pretty much what I expected.  From the 50's to the 60's (when America was evil and bad) the economy grew 3 full percentage points faster than the working age population.  This then tanked with the oil embargoes and ensuing Volker Recession, but recovered to a full 2 percentage point premium for the next 27 or so years, before it tanked during the Great Recession. 

There really isn't much to say that we don't already know intuitively.  The economy is not growing enough to provide enough jobs for everybody, let alone increase the country's standards of living.  And it won't be until the private sector (where all jobs, production and wealth comes from) is reinvigorated will we recoup (though the data only goes up to 2012, I would love to see 2013 and 2014 with Obamacare in place).

The real debate is whether this makes people on the left happy that they've knocked the world's former greatest down to its knees or whether they're so ignorant about economics that they would never see, let alone understand the above chart.


Seerak said...

There's a tendency, mainly on the part of over-optimistic Pollyannas, to think of things like Obamacare as "blows". We get hit, we drop to our knees, than recover and soldier on, just like we did after the New Deal, the Great Society etc.

The thing is, these are cumulative, not consecutive. These aren't "blows" from which we've recovered, they are burdens that still weigh us down now. The sand they threw in the gears is still there now, even as what remains of capitalism and the private sector route around the damage as best they can.

There's a lot of discussion about how slow and anemic this rebound is, but very little as to its real meaning... for good reason.

Unknown said...

Well, the problem is not just Obama, but every politician. Until we can get the Fed under control, won't happen, and reduce social spending by like 75% and temporarily raise taxes toa sane level (I am all for tax cuts, but I am unsure if they will work now); I think everyone has to bite the bullet.

That is not my biggest fear. My biggest fear is demographics. I fear that we have several severe demographic issues. Everyone wants to make money and starve or die. Few people equate that with having kids.

Those of us in the manosphere know several reasons why not to have kids. However, we can't afford to do as the progressives and feminists have done and that is breed ourselves out.

We need new blood, not just new money and revenue streams.

Unknown said...

Assuming you could find a lefty that could understand the math, I suspect you'd get the following response.

Wait. What? We're in a recession? Lies! Damn Conservative Lies! The Media says we're recovering, so you must be lying. You just made that stuff up. Besides - your a racist.

You can't do tax cuts with out votes - you're not going to get the votes because even politicians have figured out that you have to have some income if you want to continue spending - hence tax the rich - Granted their math skills are, umm .... not good. Even with tax cuts you'd have to eliminate all the entitlements to make that work - and well, that's just not going to happen.

Doomed I tell you - Doomed.

I think the phrase is: Enjoy the Decline

Peterus said...

Well, these drops start at Nixon's presidency and the current one at Bush's presidency. Considering a few years of lag between serious decisions and their implementation - it was what was done in 2003 (or even before that) which led to this decline.

Obama could only be judged on "GDP Minus Working Age Population Growth Rate Premium." some time after he's left. If it stays below 0.02 only than it can be used against him.

BTW maybe the events that led to drop in this growth per WAP would be going off gold standard previously and now inflating completely artificial bubble (after all, dotcom had some actual real innovation below it, and housing market was just outright funneling public funds to manipulate markets).

I'm guessing you didn't get longer data sets than 1965 for this?

Faithless Cynic said...

There is a Pennsylvania sized iceberg at 400 meters and we are closing on that Fucker at 20 knots. Captain Kenyan Blaque Choomster and his merry band are too busy fighting the evil CON servatives to steer away from it. Here is some advice from a random dude on the internet:

Do whatever it takes to insure food, water, and shelter for yourself and those you Love for the next 3 years. This clusterfuck is going to unravel Thelma and Louise style.

Airborne Thunderbirds anyone?

Faithless Cynic

Joe America said...

I was looking at Wikipedia's detailing sovereign default.

This was listed as common conditions which produce a sovereign default:

A reversal of global capital flows
Unwise lending
Fraudulent lending
Excessive foreign debts
A poor credit history
Unproductive lending
Rollover risk
Weak revenues
Rising interest rates
Terminal debt

We clearly have unwise lending, fraudulent lending and unproductive lending. The 500 pound gorilla in the living room is roll over risk which of coarse leads to terminal debt.