In US, working age population is larger than ever

From Prime Working-Age Population At New Peak, First Time Since 2007 at Calculated Risk:

The U.S. prime working age population peaked in 2007, and bottomed at the end of 2012. As of January 2018, according to the BLS, for the first time since 2007, there are now more people in the 25 to 54 age group than in 2007.

Demographics is a key reason GDP growth has been slow over the last decade.

Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the “baby boomer” generation, the movement of younger cohorts into the prime working age is another key story. Here is a graph of the prime working age population (25 to 54 years old) from 1948 through January 2018.

As pointed out in the original post, the size of this group surged in the 70s, 80s, and 90s, something not always considered when comparing GDP. This could be a sign of increased GDP in the years to come, though the last time this group peaked in population was 2007.

What are the chances of a recession?

From Bill McBride’s post Is a Recession Imminent? at Calculated Risk, a look at the likelihood of a recession soon. (hint: no)

However, just because this is a long expansion, doesn’t mean the expansion will end soon. Expansions don’t die of old age!  There is a very good chance this will become the longest expansion in history.

There are several reasons this has been a long expansion. Recoveries from a financial crisis tend to be slow since it takes years to resolve all the excesses. Also, there was an early pivot during the recovery to fiscal austerity that slowed the pace of recovery. Importantly, the Federal Reserve didn’t overtighten like in the ’30s (a lesson learned). And housing, always a key cyclical sector, didn’t participate early in the recovery since there were so many foreclosures. This delayed the usual boost from housing, but housing now a key driver of the expansion.

McBride has a good track record and includes some of his key leading indicators for predicting recessions.