One critical, but often overlooked, factor in macroeconomic analysis is population trends. From Chris Hamilton at economica.blogspot.com:
Economists spend inordinate time gauging the business cycle that they believe drives the US economy. However, the real engine running in the background (and nearly entirely forgotten) is the population cycle. The positive population cycle is such a long running macro trend thousands of years in the offing that it’s taken for granted. It is wrongly assumed that upon every business cycle downturn, accommodative monetary and fiscal policies will ultimately spur greater demand and restart the business cycle once the excess capacity and inventories are drawn down. However, I contend that the population cycle has been the primary factor in ending each recession…and this most macro of cycles is now rolling over. Without this, America (nor the world) will truly emerge from the next recession…instead it will morph into an unending downward cycle of partial recoveries…contrary to all contemporary human experience.
The evidence for my contention begins with the 25-54yr/old US population, which peaked in December 2007 and remains below that peak ever since (this population is presently about 400k fewer than Dec of ’07). However, total US full time employment is now 3.6 million above the previous peak in 2007. This 25-54 to FT employment relationship is now 1:1…just as it was in 1980 and 1970.