You’re probably thinking that that’s a paradox.
If job openings are greater than the total unemployed for the first time since 2000 (when job openings were first measured), you’d think: the economy is so good that this can only continue.
Here’s the big problem: We are running out of workers to hire in this unprecedented over-stimulated economy after over nine years of QE, and, most recently, major tax cuts.
It’s simply a matter of projectable demographics.
The chart below shows how total employment never gets as high as the civilian labour force, or what is more commonly called the workforce. This number only includes the people that are looking for work over time, which naturally excludes retirees, college students, caretakers and people on disability.
Source: Bureau of Labor Statistics
There’s always a gap between the employed and those seeking employment, or the labour force.
Looking at recent employment peaks, that gap is presently the smallest since 1974, as the table below shows.
Source: Bureau of Labor Statistics
In other words, we’re running out of workers to hire in this artificially overstimulated economy.
The previous high was in early 2001, after the greatest demographic and technological period of growth and productivity in our lifetimes. I’ve been warning for months that there’ll simply be a point when the workforce naturally slows.
By our projections, people enter the workforce, on average, at age 20.
The average age of retirement is around 63.
There’s a peak projected to take place by late 2018, with a minor slowing of about 1% that bottoms out around 2026.
Then workforce growth is very slow for decades to come — about 0.2% on average — and declines rapidly after 2038.
This can’t go on, surely?
Given that we’re at the highest rate of employment that we’ve seen in four and a half decades, it’s logical to assume we’re running out of workers. Job numbers aren’t far from slowing, and likely will at some point. The only question is: Are there more people that will re-enter that aren’t currently in the workforce and/or actively seeking a job?
You’ve likely heard that there were 14 million people that gave up looking for jobs after the Great Recession. There’s a recent estimate that suggests there are still five million of those left after rehiring most of those 14 million.
But I think that’s overstated.
If you aren’t even looking after 92 straight months, with over 200,000 jobs created, when are you going to look?
That leaves 2.35 million who have looked in the last year.
Then you have to subtract the 0.9 million people who say they can’t work now — they could be caring for someone sick, are sick themselves, or are in short-term training, etc…
That leaves us with 1.45 million people.
I’d say that’s a decent pool of people to pull into the workforce again. And that’s just a six and a half month’s supply at the recent rate of 223,000 per month.
In an in-depth 2016 survey, only 1% of US people out of the workforce said it was because they couldn’t find a job. That would imply that there’s just under a million potential people coming into the workforce — only four months’ supply of 223,000 monthly jobs created.
Another survey showed that, for the first time, there are more job openings than there are unemployed and seeking — 6.7 million versus 6.1 million. That’s a sign to me that we’re running out of people who’re returning to the workforce due to strong opportunities.
And as baby boomers age, more will choose to retire. That’s why workforce growth overall is peaking this year, and will decline or flat line in the coming years.
So, there’s no way for sustained 4% growth. Especially with productivity rates having declined to 0.5%, and still falling with aging.
There’s always a certain percentage of workers who are in transition between jobs after being fired or choosing to leave for a better opportunity. That tends to be 3.5% to 4%, which is why we never get 100% employment of those seeking.
That’s four and a half to six million workers, and that’s about the present gap between employed and the labour force.
The lowest unemployment rate before now, which is 3.8%, was 3.5% in 1969, before a 14-year downturn with four recessions and record inflation rates.
That’s what I call the ‘summer’ economic season.
‘Winter’ is coming, and it’s much worse…
Editor, Harry Dent Daily