In the future, U.S. growth will be slower. Recessions will be deeper. Recoveries will be weaker. And there's exactly one thing to blame.
That's the stark conclusion from James Stock and Mark Watson in this fascinating, and occasionally depressing, new paper
. In fact, they say, the future is now. For the last few years, we've weathered the beginning of what demographers have called the grey tsunami
. "Most of the slow recovery [in today's job market] is attributable to a long-term slowdown in trend employment growth," Stock and Watson write.
The authors blame two demographic demons for our uncertain future: (1) the plateau in the female labor force participation rate, and (2) the aging of the U.S. workforce. Their underlying logic is that without continued growth in female workers or a significant boost in population, employment and GDP growth will slow, leaving us vulnerable to recessions with "steeper declines and slower recoveries." In such a future, jobless recoveries will be the only recoveries we know.
Demographic Demon #1
WOMEN'S PARTICIPATION RATE
In the first half of the 20th century, female employment wasn't exactly a high-priority concern for policy makers. For the first 20 years of the century, women didn't have the right to vote. For the next 30 years, they barely made up a fifth of the labor force. Then everything changed.
The ascendance of women in the workforce was perhaps the singular cultural/economic triumph of the second half of the 20th century. In 1960, just four in ten working-age women were active in the labor force. By 1990, it was more like six in ten (see graph below of female participation rates). By 2010, women made up a majority of the workforce. But that growth appears to have hit a ceiling. The female participation rate in early 2011 was the same as in 1994. In that time, the male participation has fallen. That's not good news for a country that will require more workers to both grow the national pot of money and provide for an aging population transitioning out of the workplace.