Happy Labor Day! Well, it may be a happy Labor Day for US residents who are employed in well-remunerated, full-time, enjoyable jobs. Just as I thought – I don’t see many hands going up. And judging from the non-farm payrolls data released last Friday, much of the workforce has little to be cheerful about. In fact, the data are beginning to make me reconsider the theory that the US is about to face a lost economic decade, a la Japan. Not because I think the US’s prospects are significantly better than Japan’s, but because employment data, and other indicators, suggest that the US has already experienced a lost decade.

First, the payroll numbers, which, after all, are what Labor Day is all about. The good news? The US government is hiring: 22.5mn are on Uncle Sam’s books, up a cool two and a quarter million from 20.0mn in August 1999.

The bad news? Looks like the private sector is getting crowded out by a bloated public sector. Ten years ago, August 1999, the US private sector employed 108,959,000 people. As of August 2009, the US private sector employed 108,736,000 people. That’s right, the number of people gainfully employed in the US private sector has actually declined over the past decade. That is despite a 15mn increase in the US labor force, and a 33mn increase in the overall population. And unfortunately, the job losses aren’t yet over, and probably won’t be until the middle of 2010, so the time warp is set to continue.

Source: US Bureau of Labor Statistics

And the headline unemployment numbers (at 9.7% and heading to 10.0% and beyond) look uglier the deeper you dig. Here’s one: the percentage of the population that is employed has fallen to just above 59% — the lowest since the early 1980s. Yes, the economy is more productive now, which means that aggregate output is not so badly affected. But the 1990s, which had the biggest US productivity gains in decades, thanks to the internet revolution, saw an increase in the proportion of the US population employed rise from 61% to an all-time peak of 64.5%. With these numbers now declining, who is going to be left to pay a rising tax bill?

‘Lost decade?’ ask the nation’s manufacturing workers. ‘How about a lost century?’ Manufacturing jobs peaked at 19.5 million in June 1979. But since then, nearly 8 million manufacturing jobs have been shed, in line with the rise of the service sector. The 11.8mn manufacturing jobs recorded in August 2009 was the lowest since April 1940. The latter was 20 months before the Japanese bombed Pearl Harbor.

Source: US BLS, Federal Reserve Economic Data

Secondly, GDP per capita, a pretty important indicator of national economic well-being, appears to have grown fairly robustly over the past decade, from US$33,215 in 1999 to US$45,547 this year, according to our projections. But the picture changes dramatically when we stop looking at it in US dollar terms. (Even Zimbabwe had strong GDP per capita growth over the last decade in local currency terms.) The US dollar’s weakness versus the euro, for example, means that GDP per capita has gone from EUR31,176 in 1999 to 32,533 in 2009 – not exactly gangbusters growth (and far worse when compared with the EUR37,670 in 2000). Put in gold terms, the trajectory is outright depressing.

Thirdly – and you should know this already – stocks have, for all intents and purposes, gone nowhere since 1999. And the housing market has plummeted over the past four years, with a bottom in sight, but no rebound. Overall, net worth peaked at US$64 trillion in Q2 2007, and fell to US$50 trillion in Q1 2009. A technical chartist might expect the number to fall further, to early 2000s levels, at around US$40 trillion, which would leave the 2000s as – you guessed it – a lost decade. These should be worrying developments for the would-be retiree Baby Boomers, who may have to reconsider their plans for a place for the sun.

US Net Worth (trillion US$) - Source: US Federal Reserve

There’s plenty more data to back up the ‘lost decade’ case, but let me give you one area in which growth has continued uninhibited over the past ten years. Between Q499 and Q109, the national debt level (of households plus Federal government plus corporate debt) has risen by US$27.5trn, from US$25.4 trillion to US$52.9 trillion. Double the debt (up 108%, actually), and not much to show for it. And household debt? Up from US$6.0 trillion in Q4 1999 to US$13.7 trillion as of Q1 2009. Terrible in itself, but now consider this alongside the decline in the workforce. Based on my calculations from the Federal Reserve Flow of Funds data, in Q4 1999, the household debt burden was US$55,000 per employed worker. In Q1 2009, it was US$124,500. Let’s not get into the government debt burden – today is a federal and state holiday, after all.

So for all readers concerned about the US being the next Japan, I have a scarier scenario: what if the next decade is worse than the last?