12/5/20

Labor force participation rate in the USA will fall to 59% by 2025-2030. Revision of the 2013 prediction

 Seven years we presented a description of secular fall in the labor force participation rate, LFPR, measured by the Bureau of Labor Statistics (see original prediction in Figure 1). The LFPR (the portion of people in the labor force) for the working-age population (16 years of age and over) has been on a long-term decline since 1995. We predicted the fall down to 59% by 2025. The series of events in 2020 dramatically affected the labor force market in the USA and show that the overall evolution of the LFPR to the predicted level is still accurate. Between 2014 and 2019, the LFPR was hovering around 63% and slightly deviated from the predicted trajectory. Such deviations are not stable, however, and also were observed in the past. The long-term LFPR behavior is close to a sin(t) function. This might be an expression of the oscillating natural process driving the LFPR evolution as described by Russian economist Kondratiev, who introduced long-period (50 to 60 years) waves in economic evolution – see Figure 2. Following Kondratiev, we interpolated the observed LFPR curve by a sinus function with a period of ~70 years. In Figure 3, we added ~50 LFPR readings published since 2016 and show the most recent portion of the curve in Figure 4.

New data fit the predicted curve and allow to make some predictions.  We see that the bottom of the model function is expected in 2030 and the rate is 58.5%. We also observe the development of a new short-term level in the LFPR is expected near 61.5 %. The drop in the LFPR is an irreversible and economic activity in the USA is near the lowermost level. This does not mean, however, that international financial domination of the USA will not feed the US stock market and budget with money. The drop in the LFPR just means that the US labor market is on the degradation trajectory - more and more people will lose jobs before 2030. Actual recovery is possible only after 2040. It is not excluded that the next 20 years is the era of the US (more likely international) financial institutions.

Figure 1. Original prediction of the LFPR evolution in the USA made in the earlier 2010s. The long-term behavior is close to a sin function. This is an expression of the oscillating natural process in the background  of LFPR evolution.


Figure 2. The Kondratiev wave

 

Figure 3. Same as in Figure 1 with 50+ new readings since 2016. The drop in 2020 moves the observation curve down to the predicted one with a weak rebound in the second half of 2020.


Figure 4. The actual LFPR curve (red) and that predicted by sin function since 2000. Development of a new level in the LFPR is expected near 61.5 %.

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