by Gary Alexander

May 3, 2022

How is it that the 400 PhD economists at the Federal Reserve missed the fact that $6 trillion in new money would not cause inflation – stating with confidence that it would be “minor” and “transitory”? Then, their GDP growth forecasts were so far off the mark that few foresaw the decline in first-quarter growth, not even the Atlanta Fed’s highly touted real-time GDP model called “GDPNow,” which in mid-April saw a 1.1% first-quarter increase. Last Thursday’s official tally was the opposite, a 1.4% annual rate decrease.

A couple of weeks ago, I was interviewed by Real Wealth’s Kathy Fettke, and she asked me how the Fed could get so many forecasts so wrong. I basically answered that they go to the same elite universities and use the same textbooks, which sadly treat economics as a mathematical exercise (using econometric models). These models – like climate models, or COVID models – seldom work well, since they don’t take human action into account. I countered that the Austrian School of Economics is less mathematical and more behavioral. Ludwig von Mises’ 880-page magnum opus is titled “Human Action” for a reason.

Human beings have several motivations for making economic decisions, and they’re not all about money. Satisfaction comes in many flavors: Happiness, family, artistic freedom, health, status, love, and more.

“Guys and Dolls” composer Frank Loesser put it succinctly in the verse to the title song of that musical:

“What’s in the daily news?
I’ll tell you what’s in the daily news.
Story about a man bought his wife a small ruby
With what otherwise would have been his union dues.
That’s what’s in the daily news.”

“What’s happening all over?
I’ll tell you what’s happening all over.
Guy sitting home by a television set
That used to be something of a rover.
That’s what’s happening all over.”

Those are two examples of differing motivations in economics, beyond money. Ironically, you could superimpose these two vignettes onto 2020 – one guy is shorting his union dues, the other ends his high life. In 2020, many inner cities became dangerous from both disease and riots, so many decided to move to the country. We’ve seen this in our small town with a doubling of land prices and few homes for sale.

Here’s a 2020s verse for that same song, applied to the post-COVID world:

“What’s happening with Growth?
I’ll tell you what’s happening with Growth.
Man and wife worked at home due to Covid.
Sold their home, moved to the country, took a Frugality Oath.
That’s what’s happening with Growth”

–My updated opening verse to “Guys and Dolls” (1950) for 2020

Two years after COVID began, many workers are now 50 miles from their old jobs and don’t want the office commute. Working from home worked just fine. So, companies can’t find new working stiffs.

The Slowly Disappearing U.S. Male Worker

The labor force has always been in flux, so we shouldn’t be surprised by a worker’s revolution. Our Labor Force grew fastest from 1960 to 1980 due to (1) Baby Boomers turning 18, from 1964 onward; (2) women entering the labor force, from 1970 on; and (3) immigration; but this rapid job growth began to shrink in the double-dip inflation-fighting recessions of 1979-82 and then in the financial crises of 2008 and Covid.

Civilian Labor Force Growth Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Our civilian labor force is now growing at an average of just 0.5% over the past five years (through March 31). Demographics can’t be denied. The number of deaths is exceeding births in most rich nations. One in five Chinese is over 60. Our own Baby Boomers are mostly retired now, but the same trend is now global. The entire world is having fewer babies, and the global labor force will expand at a slower and slower rate worldwide throughout this century until the labor force doesn’t grow at all by the 2080s.

Working Age Population and Projections Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The American male worker is already fading into the ether like the Cheshire Cat in Alice in Wonderland. The overall Labor Force Participation Rate peaked at 67% in 1999 and is now at a 45-year low of 61.7%, but the male labor force participation rate is not on a “bell shaped” curve like the overall rate (including women). The male rate has been on a long decline since 1950 as women have begun to dominate college degrees and white-collar office and professional jobs. The male labor force participation rate was about 87% in 1950, when nearly all women worked at home, but that rate has dipped to around 67% by 2020.

Labor Force Participation Rate for Men Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Imagine: One in three males of working age is on strike from the Labor Force – an un-American stance in 1950. Since 1980, women have earned more college degrees than men and soon dominated most white-collar office jobs. Currently, over 60% of students on campus are female, earning 60% of college degrees.

Men still dominate the CEO spots, but they also dominate the lowest and most dangerous and dirty jobs.

College Degrees Conferred and College Degree Gap Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Meanwhile, food and energy prices are soaring, so we’re doing the best we can. That’s not all bad, if a simpler life causes us to slow down and enjoy family and create a new life that feels more fulfilling, but for those living on the razor’s edge of existence, there aren’t many alternatives to jobs and commutes.

There’s one more factor, and that’s what’s happening in the biggest nation on earth, China.

China is Cracking Down Again, Reducing Trade Volume

China didn’t learn from the overblown fears of the Omicron variants in Europe and America. Today, one-fourth of China’s 1.4 billion people are in full or partial lockdown in an overreaction to a few hundred deaths. Shanghai has the most draconian measures in place for just 344 deaths. Hong Kong has had zero Covid deaths. Beijing has started a massive process of forced testing of its 20 million citizens with only low double-digits of daily cases so far, and no deaths, according to the South China Morning Post (April 27, 2022: “Coronavirus in China: 12 positive cases as Beijing tests 20m people, SCMP). In all: 12 cases on Day 1, 19 cases last Sunday, 33 on Monday, 34 on Tuesday, and 138 cases in a week, with no deaths.

China's "Social Distancing Policy" Obedience Image

In Shanghai, there are tales of people starving in their fenced-in apartment buildings, workers sleeping at their job sites to limit the chance of catching Covid, or being forced into tight hospital hallways with other Covid patients once diagnosed, with their pets being slaughtered if no immediate pet-sitter can be found.

This disease is “just what the doctor ordered” to turn routine control-freaks into “dictators for life.”

And that’s what’s happening to Growth! Clearly, we need leaders more able to balance freedom and risk.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

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About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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