Wednesday, September 30, 2009

Random Musings

Are Parents Keeping Their Own Kids Out of the Workforce?

I have been exploring various methods of examining how our demographics are factoring into our economy. I think such an examination is all the more meaningful given the fact that boomers have seen such a dramatic decline in their net worth at a time they saw retirement on the horizon. The implications are, of course, vast, and many may stay in the workforce much longer than they’d ever expected.

Among the possible consequences of a workforce that pushes back retirement is the effect it has on new labor market entrants (e.g. it’s harder for them to find a job). I did some work on this over at, and present another analysis of it here.

I decided to look at the ratio of Employed 55+ to Employed 25-54. These two cohorts make up the vast majority of workers – only those 16 – 24 are omitted, and I did that deliberately to focus on those who are (presumably) more career-minded (or at least I’d hope).

The front end of the boomers – born in 1946 – started hitting the workforce in about 1971, and continued to do so until the last of them – born 1964 – entered in 1989. What we see couldn’t be more clear: As the boomers entered the workforce, they drove the ratio of 55+/25-54 ever lower, until it bottomed out in the early-to-mid 90s. As that same front end of the boomer generation hit 55 – in 2001 – that trend started to reverse, and has been going up as successive years of boomers hit 55 and stay in the workforce. There is no telling how much higher this ratio might go, or if it will hit a new high, but that would certainly not surprise me.

The irony of it is this: We spend a fortune to put our kids through school, only to now have to keep our own jobs longer and effectively freeze them out of the work force. (Click through for larger images.)

For some fascinating further reading on demographic trends and the movement of boomers through the system, see here (.pdf).
Some Thoughts on Today’s GDP Release

Taking a look at today’s final Q2 GDP release, some items stood out:

PCE as a contributor to GDP has been down in four of the last six quarters. This is unprecedented. I’d further note that Q2 of 2008 – which got goosed by the Bush stimulus to nowhere – printed as a +0.06 contribution. Without that stimulus, there’s no doubt at all that PCE would be a negative contributor in five of six quarters.

We’ve not seen anything like this in the history of BEA’s records:

Further, the six-quarter average contribution of PCE to GDP is now at a record low –0.86:
Exports and government spending carried the day today. Period.