Almost 60% of America depends on an increasingly small pool of job producers. The number of people employed in the private sector is at levels last seen in 2009. But the population has increased by almost 25 million over time.
Public sector jobs are productive. It’s possible some are even more productive than marginal jobs in the private sector. But no matter how productive any job is, the private sector is responsible for paying for the public sector.
Private Sector vs. Public Sector
The result of long-standing trends is that the percentage of private sector employees is at its lowest level since 1983. This is becoming a bigger and bigger problem.
As noted, private sector employees support jobs in the public sector. There is no debating that we need teachers and other government workers. But the size of government has increased significantly since 1983. That creates a larger financial burden on the private sector.
As the chart above shows, the country once had a smaller ratio of private sector employees in regard to population. This was prior to the 1970s, when there were more households with a stay-at-home parent.
Lifestyles were different then. But choices were also vastly different than what we have now.
It’s unlikely society at large would be willing to return to the relatively downsized lifestyles of the 1950s.
A relatively downsized government presence is also unlikely.
While there is some waste in government offices, it’s not politically possible to eliminate environmental and consumer protection agencies, among others, that have become more important in the past 70 years.
As the government grew, fewer workers have supported more people since the beginning of the century.
Eventually, more workers need to join the private sector, or the public sector must be scaled back.
Society must figure out a way to pay for all of this.
The recent economic shutdown pushed that day of reckoning at least a little bit closer. Now, the choices will need to be made and the choices will upset many people.
But as the chart makes clear, the status quo cannot last much longer.
• Michael Carr is a Chartered Market Technician for Banyan Hill Publishing and the Editor of One Trade, Peak Velocity Trader and Precision Profits. He teaches technical analysis and quantitative technical analysis at New York Institute of Finance. Mr. Carr also is the former editor of the CMT Association newsletter Technically Speaking.
Follow him on Twitter @MichaelCarrGuru.