One day last week, The Wall Street Journal had two articles of interest and significance for people concerned with trying to estimate energy demand growth. One article dealt with the Census Bureau release of data showing that for the twelve-month period July 2010 to July 2011, minority births accounted for more than 50% of all births in the country. This marked the first time in the history of the United States that non-Hispanic white children accounted for less than half the country's births.
The statistics point to the white population being barely above the point where births (1,025) exceed deaths (1,000). In contrast, all other ethnic groups showed a birth/death ratio of 3,940/1,000. According to data from the Pew Hispanic Center, Hispanic women give birth to 2.4 babies on average, compared with 1.8 babies for non-Hispanic whites. Moreover, minority women are younger on average, so more of them are in childbearing years.
For the economy, this rapidly growing non-white population gives America a significant workforce advantage over other developed countries. Both Japan and parts of Europe are experiencing shrinking populations as deaths outnumber births. The economies of these countries will be struggling with falling populations, and aging populations. Even China has a demographic challenge as a result of its one-child population control program, which dictates that the country's population will peak in 2015. These trends highlight the importance of the second article that dealt with the missing jobs in today's economy.
David Wessel, who writes the "Capital" column in The Wall Street Journal, authored an article questioning where all the workers have gone. As he pointed out, the number of people in the U.S. who are 16 years old or older and not in the military has grown by 5.4 million over the past two years. During the same time, the number of people working or looking for work hasn't grown at all. He questioned whether this was because the baby-boomers have started to retire, or have a lot of people dropped out of the workforce temporarily and will come back when the economy improves, or are these drop-outs never to return.
Mr. Wessel did a brief review of the history of workforce participation of men and women and how that has changed over time. Male participation has slowly declined since 1948 while the women's rate has increased. The female participation rate rose until it hit 60% in the early 1990s and then plateaued until the recession and the disappointing recovery. The analysis looks at the labor force participation rate of various population categories. Equally interesting is the graph in Exhibit 7 showing the decline in the overall labor force participation rate compared to an estimate of what it would have been had demographic trends remained stable.
The last part of the article dealt with the issue of what happens with the missing workers if they return to work as the economy improves. What Mr. Wessel worries about is whether the falling participation rate "signals a more worrisome dynamic: More jobless and disheartened workers turning to disability benefits or reluctant retirement, or otherwise leaving the workforce for good." Mr. Wessel believes this would be not only a waste of human potential, but also that it diminishes the maximum rate at which the U.S. economy can grow.
The downside to this scenario is that there is an increase in the number of Americans who will need the support of a smaller workforce and it makes the budget deficit greater because there are fewer workers to pay taxes. The number of 'discouraged workers' is probably understated because the government survey only counts those who say they want to work and have looked for a job in the past 12 months. As long-term unemployed workers lose their benefits, they disappear from the workforce. Will they return, or are we destined to have a large population of never-again employed with the associated economic and social costs?
The demographic changes underway in America will have an impact on the pace of economic activity and the amount of energy needed. A slower growing economy, with more people living in urban areas, means a reduced rate of future energy consumption. Will that be our future, or are we destined for another scenario?
G. Allen Brooks is Managing Director of Houston-based investment banking firm Parks Paton Hoepfl & Brown. This article originally appeared in the May 22, 2012, issue of PPHB's newsletter "Musings from the Oil Patch."