Suite101.com Market Timing Model: Shall we resurrect this discussion?

» Demogremlin - Shall we resurrect this discussion?

I've seen a lot of potential indicators thrown around here. Which ones are you thinking of using for the model?

Are you trying to reconstruct Brinker's model, and go from there? Or are you trying to start from scratch?

What do you think of demographic considerations? I'm not a huge Harry Dent fan, but I do think demographic considerations played a large part in the high unemployment/high inflation environment in the late 70s/early 80s. It may have something to do with the productivity gains in the 90s too.

Dent puts a lot of stock in what he calls the "spending wave", which is basically reducible for him to the number of 46-47 year olds in the country.

Households spend more when headed by people of that age, than households headed by people of any other age.

I'm suspicious of this. I can provide my reasons later if anyone is interested.

I'm more interested in trying to predict the size of the labor pool based on demographic considerations.

I got the fed's civilian labor pool statistics from the late 40s to present. I charted the absolute increase from year to year. (I'll post that somewhere if anyone is interested) By the way, I've found www.economagic.com to be a great site for charts and data. Perhaps there are better ones, but that's what I've been using.

I also found a graph of the number of live births annually from 1910 to present. I did my best to put the data in a table (reading it off the chart) and made a chart of my own.

I also made a number of charts to try to get a proxy for the growth of the labor pool. As a first attempt, I charted the number of 22 year olds minus the number of 62 year olds.

I figured people tend to enter the labor force full time on average at 22, and leave it, on average at 62. I kind of pulled these numbers out of the air, but they seemed a reasonable first stab.

I found that the chart looked something like the official labor pool statistics in the past, but not enough so for comfort.

So I fiddled with the ages a bit. I went as low as 16 years for entering the market, and as late as 65 for leaving it. I haven't tried every combination, but nothing seems to fit as well as I'd like. Although some are better than others, and may actually be of some value.

My thought is that if I can find a combination that matches the past data pretty well, it might match the future data also. That's what we want isn't it.

well, I have many questions. Perhaps I should supplement my data with immigration data, Government sector employment figures, and other things I haven't thought of yet. (maybe death rates for people between 22 and 62) Perhaps that would make a better model for predicting future labor pool numbers.

One thing that is striking. No matter what numbers I use: Sometime between 2008 and 2015 there is going to be a shrinking of the domestic labor pool, due to baby boom retirements outpacing the number of people entering the market.

Here's the final question. What would this mean. What would be the results of a contraction of the labor pool. It seems like it would have significant ramifications. GDP would have to suffer, wouldn't it -- unless, of course, we could find enough foreign workers to fill in.

Would such an economic contraction be inflationary or deflationary? What would this depend on?

Just some thoughts.

Panspar

-- posted by Demogremlin