Working-age population only growing a third as fast as it once did The population of the working-age population is growing only a third as fast as it once did.Back when I started reporting on the economy 20 years ago, there was a simple rule of thumb for the health of the labor market: The economy needed to create about 150,000 net jobs every month to keep the unemployment rate steady. That became the standard for economists, the media and politicians: Anything above 150,000 a month was considered strong, but anything below that was worrisome. If the trend was 150,000 or more, the unemployment rate would fall. If the trend was lower, the jobless rate would go up. In mid- to late 1990s, that standard was reliable enough, but today it’s terribly out of date and far too high. To absorb today’s slower growing population, we only need about 50,000 net jobs a month, not 150,000. In the next few years, the standard will fall to about 33,000. It’s going to take some getting used to. Yet we still hear pundits and politicians refer to the 150,000 rule of thumb, particularly in months such as March when payroll growth slowed to 119,000. One economic analyst on Wall Street even suggested this week that the Federal Reserve would need to see job growth of 275,000 in both July and August in order to meet its goal of seeing “some further improvement” in the labor market. That’s significantly higher than average growth of 209,000 we’ve seen over the past four years, a pace that’s brought the unemployment rate down from 9.1% to 5.3%. Don’t get me wrong: We still have lots of slack in the labor market, which can temporarily supply hundreds of thousands of fresh workers every month. Millions of people would like to work, but aren’t. Millions would like to work 40 hours a week but can only get 20. There’s still a large supply of capable and willing people ready to work. But once that slack is taken up, job growth will necessarily slow. Instead of expecting job growth of 200,000 or more as we have over the past few years, instead of thinking that 150,000 net jobs is the bare minimum we need every month, we’re going to have to get used to payrolls growing at 50,000 a month, or even 33,000. Thirty-three is the new hundred and fifty. Why is that? It’s the demographic math. The number of Americans between 16 and 65 is growing only one-third as fast as it was in the late 1990s. Instead of growing at 200,000 or more a month as it did in the 1970s and late 1990s, the working-age population has risen at just 71,000 per month over the past two years. And the Census Bureau predicts the working-age population will grow just 50,000 per month over the next 15 years. Of course, not all of them will want to work, or even look for a job. Some will go to school, some will retire, some will stay at home to care for family, some will go into the army or into prison, some will be simply be too lazy or too crazy or have some other reason (good or bad) to remain out of the labor force. On average, over the past 50 years, about two-thirds of working-age adults were in the labor force. So, if the working-age population is rising at 50,000 per month, the labor force would need to increase about 33,000 per month to maintain a stable unemployment rate and stable labor-force participation rate. Payroll growth of 33,000 per month doesn’t doom us to poverty. It’s a supply constraint on growth, but that could be good for workers and their families because it implies that labor will be scarce and that wages should rise accordingly. The growth rate of gross domestic product will necessarily drop, but per capita GDP won’t slow as much. If we want higher growth, we’ll need to figure out how to boost our economy’s productivity. That’s our real challenge. Our demographic destiny is pretty much set for the near term. The one sure thing we could do to bring back the old days of 150,000 jobs per month would be to open up our borders to immigrants. Otherwise, get used to 33,000. marketwatch