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Thursday, September 27, 2012

We Only Need 65,500 Jobs a Month To Accommodate Population Growth?

How Many Jobs Do We Really Need Per Month to Keep up With Population Growth?

This is a big, big question, and I see it discussed everywhere.  The common wisdom is that we need something like 150,000 to 200,000 jobs a month to "keep up" with population growth.  Though we have been churning out an average of about 151,000 more jobs per month this year, that's still not seen as "enough" to keep up with job growth much less make up for the jobs deficit of the 2008 to 2010.  

So let's look at the facts of jobs numbers and population.

First of all, I'm going to assume that the population growth rates and trends that we have had for the past three years will continue at least for another year or two.  (I haven't yet checked this against the CBO or Census growth estimates.)

Since Obama took office, we've added 8,800,000 people to the "civilian non-institutional population 16+" or 205,000 more people per month since January 2009.   At an employment participation rate of 63% (which is what the employment participation ratio was before the crash), that would SEEM as though we need 133,000 MORE people EMPLOYED a month just to keep up, assuming similar population growth patterns for the next year or two.  This does NOT include employment to make up the "jobs deficit" of 2008-2010.  Now, the number of establishment JOBS (which is the reported monthly jobs number) is about 93% of the number of people EMPLOYED (which includes farm workers and self-employed people not captured in the establishment jobs data).  So let's take 93% of 133,000 and it seems as though we need 124,000 jobs a month JUST to keep up with that population growth.

But not so fast......

Let's look at those 8,800,000 "extra" people:

  • The 55+ age group:
    8,670,000 of those "added" people, or 202,000 a month since January 2009, are in the 55+ age bracket. (And 4,400,000, or over half of that increase, are in the 65+ age bracket.  I'm not even going to get into that.)  These are the Baby Boomers who are getting older every year.  Now despite the problems with the economy, these people are dropping out of the labor market.  At the "normal" employment participation rate for this age group, which was 37.5% in 2007-8, we need 75,800 more "employed" people and 70,500 MORE JOBS a month for this age group.  (Remember that we have a ratio of about 93% of the number of "employed" people to get the number of establishment jobs we need.)
  • The 16-24 age group:
    1,300,000 of those added people, or 30,200 a month since January 2009, are in the 16-24 age bracket.  At a pre-crash employment participation rate of 52% for this age group, we need 15,700 more "employed" and 14,600 more jobs a month for these young people.
  • The 25-54 age group:
    Meanwhile, among people in their prime working years, there are 1,150,000 FEWER people, or 26,700 FEWER per month,  in the 25-54 age group.  At a pre-crash employment participation rate of 80%, we need 21,300 FEWER people "employed" and 19,800 FEWER jobs a month for this age group which is declining in population right now.  (Now, this age group isn't going to keep declining forever, but for the short term, it is declining.)

Using the above calculations, how many establishment JOBS do we need to keep up with the growth in population? 

70,500 jobs a month for those 55+ plus 14,600 for those 16-24 minus 19,800 for those 25-54.  This equals about 65,300 additional "establishment jobs" to keep up with population growth.

Anything over approximately 65,500 more jobs a month will serve to decrease the jobs deficit of the 2008-2010 time frame.  At job growth of around 65,500 jobs a month, the unemployment rate will not move much.

If we really don't need more than 65,600 additional jobs a month, how long will it take us to make up the deficit we incurred in 2008 to 2010?

I'd have to look at population growth projections in more detail to make a more careful assessment, which I'm not going to do today.  But here's a very rough and quick projection:  

  • We lost 8,800,000 jobs from January 2008 until February 2010, when we hit bottom.
  • That was 55 months ago.  At 65,500 jobs a month needed for population growth over those 55 months, we needed 3,600,000 extra jobs over the past 55 months for population growth.
  • So altogether, we needed an extra 12,400,000 jobs since January 2008 to accommodate population growth and job loss since January 2008 IF we want to get back to an employment participation rate that we had before the crash.
  • We have made up 4,100,000 jobs since the trough of the recession; leaving us a jobs deficit of 8,300,000 jobs.   
  • At average job growth of 150,000 jobs a month, we would need about 8 years to replace all of those lost jobs while providing for the increase in population.  At an average job growth of 200,000 jobs a month, we would need about 5 years.  However, the big Baby Boomer population bump will continue to retire out of the job market, so we would probably need fewer than 65,500 jobs a month starting around 2015.
  • As I said, I would have to look at more specific population growth estimates by age group to determine exactly how many years it will really take us to get back to full employment based on employment participation ratios of 2007.

Update 6/6/2013:
In an article published yesterday in the Global Economic Intersection blog (and several other outlets),  Daniel Aaronson, vice president and director of microeconomic research, and Scott Brave, senior business economist, at The Federal Reserve Bank of Chicago, have validated my belief that we need many thousands of jobs a month FEWER to provide for a growing population than most economists claim due to changing demographics.  They believe we now need about 80,000 jobs a month as they discuss in the following article:

80,000 Jobs a Month Needed to Reduce Unemployment
They used much more sophisticated methods than I used in this article.  They went into Census estimates and discussed the possible influence of immigration (which I didn't), but I'm pleased that somebody with some authority is looking at things the same way that I am. 


  1. The last 54 weeks we had 16,217,000 new sign up for unemployment . Creating 100,000 new jobs a week is a far figure thats needed , not a good sign , the wool has been pulled over the American public's eyes

    1. I'm sorry that I didn't see your comment earlier. You are confusing NET and GROSS numbers of jobs. The 200,000 new jobs each month is a NET number, meaning that we have 200,000 MORE jobs than we did the last month. But it doesn't mean that ONLY 200,000 people have been hired in that month.

      The JOLTS report tells us the whole story of how many people have been hired for new jobs, how many people have been terminated, etc. The JOLTS data is about 6 weeks behind the monthly jobs data, so the latest data that we have now is for July. In July 1,632,000 people were laid off or fired. Altogether in July, there were 4,998,000 "separations" meaning people who left their jobs for any reasons, most of whom quit their jobs. But 5,319,000 people were hired in July! Over time these numbers do balance out to the monthly jobs numbers.. but you can see that there were about 300,000 more people starting jobs than leaving jobs in July.

      Also, in July 1,200,000 people filed for first time unemployment. This jives completely with the 1,600,000 people who were laid off or fired in July, as not all who are laid off or fired are eligible for unemployment benefits.

      No wool has been pulled over the American public's eyes, Anonymous.. Just a lot of data that a math-challenged, easily-brainwashed public doesn't understand.


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