The Bureau of Labor Statistics’s more inclusive U-6 unemployment rate is at about 17.5 percent (source). This does not include “discouraged” workers, so the real proportion of the expected-to-be-working population that is unemployed is probably 20 percent or more. More relevant is the number of Americans with jobs: 138 million in October 2009, down from approximately 146 million in 2007. The U.S. population, meanwhile, has grown from to 301 million to 308 million. In other words, an ever-smaller percentage of Americans are working, despite substantial growth in the number of government jobs.

Let’s assume that businesses ignore Barack Obama’s directives for them to hire more U.S. workers (see “Obama to push private sector to hire at forum”). Can the U.S. economy grow? Can U.S. businesses prosper? Current stock market investors seem to think so and have bid up the S&P 500 accordingly. Are these investors irrational?

Let’s try to find some historical examples of economic growth despite limited labor market participation. In the 1950s, our culture arbitrarily excluded a lot of people from the U.S. labor market because of sex. Many employers did not want to hire women. Many women did not want to work, especially after marriage. Pressures to exclude women from the labor market were stronger in countries such as Japan. Yet despite having a large fraction of the working-age population excluded from the labor market, both the U.S. and Japan achieved strong economic growth and investors received a healthy return (almost 17 percent real return during the 1950s in the S&P 500; source).

If these economies could grow just fine with 50 percent of the population discouraged from working, why shouldn’t the U.S. economy circa 2010 be able to grow even if the unemployment rate were to grow substantially? In fact, because our labor force now benefits from the contributions of the best educated and most skilled women, in some ways the economy should be better-poised for growth than it was in the 1950s.

How can an investor prepare for a U.S. economy in which an ever-increasing number of working-age citizens are staying home and living off parents or spouses? Perhaps it is time to buy Nintendo, cable television, Sony, broadband Internet, and Dell.