Every day, investors are trying to figure out new data.
Some numbers vary from month to month, but others are updated more frequently.
Price data changes every day, even every minute, while the markets are open.
But one of the most important data points for investors is changing at a much slower pace. And it is easy to project into the future.
I’m talking about population data.
Why population data is important
It may not look like economic data. But economic growth is linked to population and productivity changes.
It makes sense, even if we do not think about it often.
If a country’s working age population grows by 10%, and the new labor force is as productive as the old one, the economy grows by 10%. If productivity increases by 1%, the economy grows by 22% because each worker (older and younger) produces 1% more, and there are 10% more workers in total.
These two factors explain almost all the changes in an economy.
It makes sense to look at population growth to understand the potential trend. The chart below shows the population trends, which are bearish for the economy.
Population growth trends
The blue line shows the percentage of the population between 25 and 54 years, which is considered the main working age. The red line shows the percentage of people aged 16 to 24.
Trends in the red line precede trends in the blue line.
The economic boom and the bull market that began in the 1980s occurred in parallel with the increase in the working age population. This gain was due to the trend in the number of people aged 16 to 24.
This time, there is no large group of teens waiting to join the work circle.
The Bottom Line: Without population growth, economic gains will depend on rising productivity.
That means we need to develop technology that improves business processes. There are promising technologies in development, but there is no guarantee that the economy will be able to overcome the winds against the population.
Michael Carrhe The editor of Masters of True Options, One Trade, Peak Velocity TraderandPrecision gains. He teaches technical analysis and quantitative technical analysis at the New York Financial Institute. Follow him on Twitter@MichaelCarrGuru.
Population Data Paints an Ugly Economic Picture Source link Population Data Paints an Ugly Economic Picture