When we talk about the impact of lower unemployment on consumer cyclical sales, I think many corporate planners and economists better be digging a little deeper to give their CEO’s a real picture. I want to be clear, I am not taking a political position. I just want to open a question that should be debated as the auto industry set goals and plans investments. Ford and GM economist seem extremely upbeat on the outlook for US employment. Are they only looking at 2013? Trying to paint a rosy picture? Or do they really know something the US Bureau of Labor Statistics (BLS) doesn’t.
Don’t get me wrong, there is a lot of pent-up demand in the US auto market after the past three years and some game-changing new products and engine technology hitting the market. But if millions of folks going back to work isn’t going to drive further growth, something else has to.
Unemployment has dropped from its highs post crises. However, even with population and corresponding adjusted civilian workforce increase, we still have fewer people working in the US. To me that means fewer people with growth income scenarios. In short, are fewer workers going to be able to buy more cars?
Take a look at the charts below from BLS as of November 2012. All are taken from seasonally adjusted data:
Bottom line: Current projections call for the labor force to grow at an annual pace of 0.7% in the next seven years . While at the same time calling for participation rates to continue to plummet another 2.2 points.
In short, we can expect around 8.9 million more workers by the end of the decade (9.6 million more than the 2008 peak.) Here comes the BUT; “working participants” will only grow by 3.0 million (62 thousand from the peak participation rate of 2008.) Somebody tell me I’m wrong!!
Interestingly, it calls for a drop of 1.3% in the 16-24 workers and a tepid 0.2% increase of peak buyers aged 25-54. If this is true, it is not a good omen for “first time capital goods buyers.” Toyota has said it expect those younger buyers to jump back in the market — favoring their brands. But won’t they need a job first.
In short, as we try to get back to the peak auto sales levels of 2006-2007, we don’t have a lot more working consumers to get us there.
“The civilian noninstitutional population 16 years and older had an annual growth rate of 1.1 percent from 2000 to 2010, but is projected to grow by a lesser 1.0 percent during 2010–2020. (See table 2.) In addition, the labor force participation rate started a downward trend in 2000, and the decrease accelerated during the 2007–2009 recession and its aftermath. As a result, the labor force participation rate declined by 2.4 percentage points over the 2000–2010 period and is projected to drop by another 2.2 percentage points between 2010 and 2020. These two declining factors lead to a projected annual growth rate of only 0.7 percent for the labor force from 2010 to 2020, a 0.1-percent drop from the annual growth rate exhibited in the 2000–2010 time-frame.”
Note: I’ve found extensive forecast on the demographics of a growing workforce, however, I can only extrapolate the growth of “employed” through the workforce participation forecasts. I guess as with many government statistics through history and around the world, we might not be looking at the right data
set. As a footnote, I am not a statistician nor an economist. I welcome any suggestions or input from those far more schooled than me on the mechanics of how the US (and any other) government uses data.