The September 2015 U.S. jobs report was released this morning. The report shows 142,000 jobs were created with an unemployment rate of 5.1% The prior month’s jobs data was also revised downward. In reporting the monthly jobs report, the news media may report about the changes in the numbers and percentages, but one subject they no longer discuss are the number of jobs that need to be created on a monthly basis to keep up with U.S. population growth.
Put simply, if a country is growing in population, from either/both natural births over deaths and immigration, then the country’s labor force should grow as well. The U.S. population is currently growing at a 0.75% annual rate which translates to about 2.4 million new Americans per year. Assuming this level of U.S. population growth has occurred for the last 18 years, then 2.4 million Americans per year become of age to work each year.
However, not every American is going to join the labor force as an adult. So using the latest labor participation rate of 62.4%, the number changes to 1.5 million, or 125,000 entering the labor force each month. Therefore, using these simple arithmetic calculations, it seems the U.S. needs to generate 125,000 jobs per month, to simply keep up with population growth.
Can we use this new calculation to estimate the growth in GDP? Of course! Assume that all jobs created over the 125,000 number are new jobs created as the result of economic growth and not population growth. For September 2015, this number would be 17,000 (142,000 – 125,000). And since there are now 149 million Americans in the workforce, the 17,000 economic jobs created translates to a .000114% monthly increase or .0014% annual increase. Put a different way, it seems the U.S. economy grew at a less than a 1% annual rate (or about a 1/10th of 1% rate) for the month of September 2015 – hardly any growth at all.
Let’s now use this new “True Economic Growth”, or “TEG” Theorem calculation for an annual economic growth rate. Through September 2015, the U.S. has seen an increase of 1.8 million jobs for the nine months ending 2015, with a current workforce of 149 million. This translates into a 1.6% annualized growth rate, not using the TEG theorem. Using the TEG Theorem, the 1.8 million jobs growth would actually translate to a 0.006% (or a little more than 1/2 of 1%) True Economic Growth rate.
As has been written before, the U.S. economy appears to be only growing as the result of population (labor) growth, not by true real economic expansion. The TEG Theorem shows an annualized True Economic Growth rate for the U.S. of less than 1/2 of 1% for 2015. True economic growth occurs above population growth – something the U.S. is currently not experiencing.