When I asked my 4 year old grandson why he was getting bigger and bigger he didn’t really know, but his sister, overhearing the question and armed with the vast knowledge acquired in 1st grade replied, “He had a birthday.” Not a bad answer. A far better response in fact than I get from most adults when asked why the economy grows and grows.
What happens when the U.S. economy doesn’t grow, is a question that millions of Americans will soon be able to answer correctly. It results in extended unemployment and homes being repossessed by the millions. Things that can’t go on forever won’t.
The employment picture is an area that is being given far too little ink. The U.S. has lost jobs for five consecutive months. This decline has far deeper roots than are being reported, after all, who wants to talk about growing unemployment when there are Vice Presidential running mates to be picked?
The U.S. by virtue of our immigration policies, added to domestic births, must grow by a minimum of 125,000 jobs per month. But it isn’t. We are in fact, contracting. Each and every month the inflow into the job market is approximately 180,000 if we consider the addition of illegal immigration.
With five consecutive months of net job losses, the imbalance can best be pictured as a dam with the inflow stream representing job seekers and outflow representing new hiring. As we can see in this example, the imbalance would cause the reservoir behind the dam to fill up with job seekers.
Even if new employment began to rise to historical exponential levels (don’t hold your breath), the continual inflow would be sufficient to match the newly created jobs. So what about the glut of the millions who were filling up the reservoir? Uh-oh!
A country that depends on exponential growth in the job market will reach the mathematically impenetrable point of what the King of Simple describes as “Maximum Sustainable Employment.”
Let’s look at Maximum Sustainable Employment with Mikeronomics. Pretend that you had a business plan for a bread bakery and in your business plan you intended to hire 10 new people every week. Eventually, bread sales would reach a maximum and you couldn’t possibly continue your hiring practice without going broke. I just described the U.S. economy.