As part of my book, I am looking at drivers of oil demand prospectively, and this involves some examination of issues related to 'secular stagnation', including employment to population ratios. One school of thought argues that such ratios can only decline as the advanced countries age, and that the US will never recover ratios seen prior to the Great Recession.
Is this true? What does a cross country comparison tell us? Let's take a look.
Japan, supposedly frozen in a liquidity trap, happens to be operating pretty close to full employment (the unemployment rate is 3.7%). And even though its population is growing old, a brief look at the statistics from the US Federal Reserve Bank show that Japan has had a larger share of its working age population (aged 15-74) employed than any other major developed country. And it is increasing, at that!
Meanwhile, Germany has demonstrated that you can increase the employment to population ratio by seven percentage points in nine years--in the very teeth of the Great Recession.
Employment to Population Ratios, Ages 15-74, of Selected Advanced Countries
Source: US Federal Reserve Bank
France, on the other hand, demonstrates that Europe has plenty of fire power left should economic conditions improve. It could increase its labor force by 13% just by following Germany's reforms.
The US, meanwhile, has gone from star to goat, with its labor force participation rate falling from 67 to 63 percent, making it worse than the 'aging' economies of Germany and Japan. It's hard to avoid the impression that public policy has been particularly poor in the US, better only than that of France in this group.