Friday, January 31, 2020

What Does Lowest Population Growth In US History Mean For Employment?

2019 saw US population growth at its lowest percentage level in US history aside from the pandemic years of 1918/1919 (when the Spanish flu took the lives of nearly 700,000 Americans). The 0.5% annual growth meant US population grew by approx. 1.55 million persons in 2019.
Today, I just wanted to focus on the implications of low population growth on US employment.  To set-up this article, I think it's important you see the raw population and employment data, by age groups.  No highly gamed unemployment percentages or in labor force or out of labor force.  Just raw population data and employment data.
25 to 54 Year-Old Population, 25 to 54 Year-Old Employees
First, the population and those employed among the largest and most influential segment of the US population, the 25 to 54 year old's.  They make up about 60% of the 15 to 64 year old population and 70 percent of those employed among the same group.  They are the engine that drives US consumption.  Their population added 59 million from 1966 through 2007 but since 2007, this segment has added just a half million.  Employment among them rose 54 million from 1966 through 2000...but has essentially stalled since 2000, adding just 3 million employees over the last two decades.
Below, the 25 to 54 year-old population (red line) and employees (blue columns) both on a year over year basis.  The growth of the population has always been a governor on the potential for employment growth.
15 to 24 Year-Old Population, 15 to 24 Year-Old Employees
To understand America, the chart below is so important.  You reap what you sow, and if your young adult population ceased growing four decades ago, you can only fake economic growth for so long.  The population of young adults has risen less than one million persons over four decades and those employed among them has declined by three million.  This population is busy attending university, at record proportions, and is once again likely at peak employment.
Below, the 15 to 24 year-old population (red line) and employees (blue columns) both on a year over year basis.  Note the current period of declining population versus rising employment.
55 to 64 Year-Old Population, 55 to 64 Year-Old Employees
It is the growth of the 55 to 64 year-old population and employment among them that has driven the US economy since the mid 1990's.  The population more than doubled from 1993 to present (21+ million) and those employed rose by 16 million.
However, looking at both the 55 to 64 year-old population (red line) and employees (blue columns) on a year over year basis, the end of growth is upon us.
Pulling it all together, the black line below is the annual growth of the 15 to 64 year-old population versus the columns representing annual employment change, by age groups (blue 25-54, yellow 15-24, red 55-64).  Three things to note here, (1) the decelerating 15-64 year-old population growth, (2) the shifting employment growth from the young adults to the 55-64 year-olds over the course of fifty years, and (3) it was the huge loss of employment in '08/'09 that provided the fuel for the current incredibly long period of employment growth despite the decelerating working age population growth.
Over the next decade, the annual working age population growth will be about 10% of what it was from 1970 through 2010.  So, to gauge potential employment growth or the fuel for employment growth...getting clear proportions of the population employed is pretty important.
I'm going to focus on the 25 to 64 year-old age segment, as they represent 87% of the employed among the 15-64 segment and they are the segment with the highest median incomes.  The chart below shows the periods of recession followed by employment growth (blue columns) above population growth (red columns).  This employment growth taking place faster than population growth has happened every time since 1970 until a ceiling, about 76%, is hit in the percentage of persons working.
Checking the proportion employed among the 25-64 population, that ceiling of potential employment appears to exist around 76%...which was hit in 1989, 1994 (but pushed through to 78% in 2000), 2007, and again in 2019.
How important is peak employment among the 25 to 64 year-olds?  Check the chart below showing the federal funds rate (black line) and the amazing correlation with the portion of 25 to 64 year-olds at work.  The pre-1981 employment peaks were considerably lower as this was before women had employment rates comparable to men...but the post-1981 period saw progressively higher integration of women into the workforce, eventually surpassing male participation rates.  So, the 76% ceiling appears to be the point of peak employable persons and the point at which growth in employment ceases, triggering the Federal Reserve to begin a new interest rate cut cycle as the recession is imminent.
But to be fully transparent, the chart below shows each age groups employment as a percentage of their population.  25 to 54 year-olds are essentially at peak employment, 55 to 64 year-olds are at record employment, and 15 to 24 year-olds regaining about half the ground they lost in the last great recession but still over 10% from all time highs.  However, due to structural reasons, this is probably about as high as the 15 to 24 year-olds will get.
All this is to say that the federal government and Federal Reserve have shot the works (tax cuts, deficit spending, QE, Not-QE?!?, etc. etc.) to get the economy well past a sustainable level...and now the lack of further potential growth among employees means a lack of growth among consumers.  The Fed has already begun the rate cuts and acknowledged there is no further fuel (population growth) to power any further economic growth.
Finally, just to offer a few more viewpoints on what has taken place...the chart below is the 15 to 54 year-old population, employees, federal funds rate, and federal debt.
Or, below, looking at declining annual US births (inclusive of all births to legal and/or illegal parents) versus surging federal debt.
Clearly, the only thing growing is debt.

Monday, January 27, 2020

What Does Lowest Population Growth In US History Mean For Housing?

2019 saw US population growth at its lowest percentage level in US history aside from the pandemic years of 1918/1919 (when the Spanish flu took the lives of nearly 700,000 Americans).  The 0.5% annual growth meant US population grew by approx. 1.55 million persons in 2019. 

Today, I just wanted to focus on the implications of low population growth on the largest sector of the US economy, housing, and in particular new housing starts.  The chart below shows annual total US population growth in millions (red line, million), the next line is the US population growth among the under 70 year old population (yellow line, million), then annual housing starts (blue line, million), and finally the Federal Reserve set federal funds rate driving interest rates (black line, %).
Really take a minute to understand these relationships... it's really important.

From 1960 to 2008, annual population growth (red line) varied from about 1.8 to 3.5 million a year and the vast majority of that growth came among the under 70 year old population (yellow line).  During this nearly five decades, housing starts (blue line) varied from about 1 to 2 million units annually, with sharp inverse swings based on the cost of money represented by the changes in the federal funds rate (black line).  

But starting in 2008, housing starts fell below 1 million units and would remain there through 2012 despite the cost of money (federal funds rate) sitting at zero for nearly a decade.  The NAR and others suggest there is a housing shortage due to this period of significantly below trend housing starts...but if you happen to look at the red line (decelerating total population growth) and the yellow line (collapsing population growth among the under 70 year old population), perhaps something else is happening.

70+ year-old elderly folks have the highest home ownership rates, are least likely to undertake new loans, and have the lowest labor force participation rates among the adult population at something like 1 in 10 working versus 8 in 10 among 50 year-olds.  In 2019, the 70+ population grew by about 1.3 million.  Point is, 70+ year-olds are not net-buyers but net-sellers as they pay down/pay off their mortgages, downsize, move to managed care, or pass away.

It is the annual growth of the under 70 year-old population that drives demand for new housing, that has high levels of employment, and the willingness to undertake long term mortgage debt.  In 2019, the under 70 year-old population grew by less than 300 thousand.  The 90%+ annual deceleration in the potential buyers versus a ten-fold rise in the annual growth of elderly has turned the housing market upside down.

But last year, nearly as many new homes were started as the total population increased...something that had not happened since 2005.  The chart below shows annual starts as a percentage of annual population growth moving inverse the federal funds rate.  The sharp increase in housing starts amid a population growth slowdown is definitely noteworthy.
While the total annual population growth is decelerating, all the deceleration is among the under 70 year-old population (declining births, declining immigration) while the 70+ year-old population growth is still accelerating.  The chart below details the annual housing starts as a ratio of annual under 70 year-old population growth from 1960 through 2015.  Nearly 40 years of interest rate cuts have mitigated the deceleration in housing starts as a percentage of under 70 year-old population growth, until...
That is until now...2018 and particularly 2019 saw new housing starts surge while population growth of the under 70 year old population took another leg down.  The result was more than four new housing starts per every new under 70 year-old in the US...aka, the hockey stick chart below.
Now, go back and look at the first chart again.  You will notice that for the whole of the 2020's, what projected population growth there is, is among the 70+ year-old population and, so long as the declining birth rates / total births and decelerating immigration continue, we should expect little to no growth among home buyers.  The idea that America needs more housing seems strange indeed.  Far more optimistic is that the 2020's will see a period of replacement level new housing rather than outright growth...more realistic might be surging existing housing inventory as elderly sellers swamp the market on their way out  and little to no new construction.

Of course, real estate is local.  On a micro level, there is likely to be a surge of rural inventory, and inversely, increasingly tight urban inventory in select cities.  This is due to a likely ongoing outflow of young adults from rural locales to select urban centers, in search of opportunity.  Either way, the net picture is unchanged or even worsened as urban fertility and birth rates are even lower than those seen in rural areas.  Or, then again, maybe the Federal Reserve can just print new buyers...or add residential real estate to its already bloated balance sheet so America can keep on building...ever more...for ever fewer?

Friday, January 24, 2020

Financialization & Central Banking Have Cemented Declines in Fertility Rates, Births, & Eventually Depopulation

Summary

Nations with 56% of world GDP have declining annual births and childbearing populations, nations with 35% of GDP have declining births but still rising/flat childbearing populations, nations with less than 9% of world GDP have rising births and childbearing populations.
Detailed below are 1950 through 2040 annual births, female childbearing, and female post-childbearing populations of worlds largest economies.
Utilizing UN World Population Prospects 2019 data.

In the wake of the great financial crisis of 2009, ZIRP/NIRP were utilized, federal deficit spending soared, asset prices skyrocketed, employment rose to record levels...but strangely fertility rates and total births have continued falling.  Actually, collapsing.  Record wealth has been accompanied by record low birth rates and unwillingness to have children, suggesting that those reaping the gains of the asset-price-pallooza are not of childbearing age.  The policies since 2009 have rewarded asset holders for being asset holders and penalized young, poor, and those without assets...for being without assets.

Simply put, costs of living and assets have risen far faster than incomes.  Rent, daycare, insurance, education, healthcare, etc. etc. have taken a progressively greater share of income leading to fewer and later marriages, fewer and later children, and a general unwillingness to reproduce.  All this has led to collapsing populations of young (and now young adults) among the nations that consume over 90% of the worlds exports and ultimately means collapsing demand while excess capacity is set to soar.

So, today I show that of the top 50+ global economies, 6 have rising annual births and childbearing populations, 9 have falling annual births but still have a rising or flat childbearing population (the precursor to depopulation), 35+ have falling births, a falling childbearing population, are in secular decline, and depopulating from the bottom up (negative birth rates coupled with declining childbearing populations).  Essentially, global consumer bases are collapsing from the young up, and this situation is only accelerating...and more debt, more QE, more interest rate cuts are only pushing birth rates and total births lower.

Many will applaud the fast declining and decelerating population growth of the nations that do all the consuming, but we are fast approaching a demographic and economic waterfall among the consuming nations that will leave little to no export led growth potential for poor nations.  And that, coupled with increasingly widely available access to birth control, means poor nations economic growth (plus birth rates and total births) are likely to follow the consumer nations down.  The outcome is a global inverted pyramid with surging elderly populations (and the policies to support them) the cause of collapsing young populations.

The 20 to 40 and 40+ year-old populations of females are not so much projections as simple math, these females already exist and are just shifted forward through the next twenty years assuming existing immigration patterns.  Births from 2020 on are projections.  Nations are in order of the percentage change of their 20 to 40 year-old female childbearing populations from 2020 through 2040.  GDP and % of total global GDP are also included for relativity.
Falling (births falling, childbearing population also declining)
***For those nations with large variations of significantly faster declines among childbearing population than projected in births, I add an estimated dashed line with declining births mirroring declining childbearing populations.
Taiwan (#15 GDP, 0.7%)
Taiwan 2020 – 2040
20-40 year old females -1.15 million, -35%
Est. annual births -61k, -35% (UN projects -17k, -10%)
40+ year old females +1.3 million, +20%
South Korea (#9 GDP, 1.9%)South Korea 2020 – 2040
20-40 year old females -2.1 million, -33%
Est. annual births -100k, -33% (UN projects -20k, -6%)
40+ year old females +2.6 million, +17%
Singapore (#21 GDP, 0.4%)
Singapore 2020 – 2040
20-40 year old females -210k, -26%
Est. annual births -30k, -50% (UN projects -18k, -30%)
40+ year old females +0.5 million, +34%
Eastern Europe excluding Russia (#13 GDP, 1.3%)2020 – 2040 (Belarus, Bulgaria, Czechia, Hungary, Poland, Moldova, Romania, Slovakia, Ukraine)
20-40 year old females -4.6 million, -24%
UN projects annual births -240k, -17%
40+ year old females, +0, +0%
China (#3 GDP, 16%)China 2020 – 2040
20-40 year old females -44 million, -22%
Est. annual births -3.2 million, -22% (UN projects -1.1m, -7%)
40+ year old females +76 million, +22%
Japan (#4 GDP, 6%)Japan 2020 – 2040
20-40 year old females -2.3 million, -18%
Est. annual births -155k, -18% (UN projects -40k, -5%)
40+ year old females -2.1 million, -5%
Thailand (#14 GDP, 0.6%)
Thailand 2020 – 2040
20-40 year old females -1.6 million, -17%
UN projects annual births -144k, -21%
40+ year old females +3.3 million, +18%

Chile (#27 GDP, 0.3%)Chile 2020-2040

20-40 year old Females -470k, -16%
UN projects annual births -20k, -11%
40+ year old Females +1.3 million, +31%
Russia (#8 GDP, 1.9%)Russia 2020 – 2040

20-40 year old females -3 million, -15%

UN projects annual births -220k, -13%

40+ year old females +1 million, +2%
Vietnam (#29 GDP, 0.3%)
Vietnam 2020 – 2040
20-40 year old females -2.3 million, -15%
UN projects annual births -320k, -20%
40+ year old females +8.8m, +45%
Brazil (#6 GDP, 2.1%)Brazil 2020 – 2040
20-40 year old females -5 million, -14%
UN projects annual births -620k, -22%
40+ year old females +19 million, +43%
Iran (#15 GDP, 0.5%)Iran 2020 – 2040
20-40 year old females -2 million, -14%
UN projects annual births -260k, -14%
40+ year old females +10m, +71%
Colombia (#24 GDP, 0.4%)Colombia 2020 – 2040
20-40 year old females -1 million, -11%
UN projects annual births -175k, -23%
40+ year old females +4.6 million, +46%
Western Europe (EU+ 29 countries...#2 GDP, 22%)Western Europe 2020 – 2040
20-40 year old females -5 million, -9%
UN projects annual births -225k, -5%
40+ year old females +8 million, +6%
Malaysia (#20 GDP, 0.4%)Malaysia 2020-2040
20-40 year old females -350k, -6%
UN projects annual births -85k, -16%
40+ year old females +3.7 million, +71%
Turkey (#14 GDP, 0.9%)Turkey 2020 – 2040
20-40 year old females -400k, -3%
UN projects annual births -145, -11%
40+ year old females +7 million, +42%
Peru (#30 GDP, 0.3%)Peru 2020-2040
20-40 year old females -190k, -3%
UN projected births -130k, -21%
40+ year old females +3.3 million, +55%
Bangladesh (#25 GDP, 0.4%)Bangladesh 2020 – 2040
20-40 year old females -240k, -1%
UN projects annual births -600k, -23%
40+ year old females, +19 million, +78%

Flattening (Births falling, childbearing population still rising)
South Africa (#22 GDP, 0.4%)
South Africa 2020-2040
20-40 year old females +0.9 million, +9%
UN projects annual births -10k, -1%
40+ year old females +5.3 million, +58%
India (#5 GDP, 3.4%)India 2020 – 2040
20-40 year old females +9 million, +4% (2032 is peak childbearing…down, down from there)
UN projects annual births -3.4m, -14%
40+ year old females +116 million, +54%
Argentina (#17 GDP, 0.5%)Argentina 2020 – 2040
20-40 year old females +430k, +6%
UN projects annual births -30k, -4%
40+ year old females +3.1 million, +34%
Indonesia (#12 GDP, 1.3%)
Indonesia 2020 – 2040
20-40 year old females +2.7 million, +6%
UN projects annual births -88k, -2%
40+ year old females +22.6 million, +47%
Saudi Arabia (#13 GDP, 0.9%)Saudi Arabia 2020 – 2040
20-40 year old females +280k, +5%
UN projects annual births -90k, -15%
40+ year old females +4 million, +96%

United Arab Emirates (#18 GDP, 0.5%)
UAE 2020-2040
20-40 year old females +60k, +4%
UN projects births +6k, 6%
40+ year old females +500k, 71%

Mexico (#11 GDP, 1.5%)Mexico 2020 – 2040
20-40 year old females +0.7 million, +3%
UN projects annual births -265k, -12%
40+ year old females +12 million, +52%
US of A (#1 GDP, 25%)US 2020 – 2040
20-40 year old females +500k, +1%
Est. annual births -290k, -8% (UN projects +340k, +9%)
40+ year old females +16 million, +20%

Canada (#7 GDP, 2%)Canada 2020 – 2040
20-40 year old females +50k, +1%
UN projects annual births +15k, +3%
40+ year old females +2.6 million, +26%

Growing (Rising births and rising childbearing populations)
Nigeria (#16 GDP, 0.5%)Nigeria 2020 – 2040
20-40 year old females +21 million, +76%
UN projects annual births +2.4 million, +34%
40+ year old females +15 million, +81%
Israel (#19 GDP, 0.4%)
Israel 2020 – 2040
20-40 year old females +400k, +35%
UN projects annual births +30k, +17%
40+ year old females +600k, +37%
Egypt (#26 GDP, 0.3%)Egypt 2020-2040
20-40 year old females +5.1 million, +33%
UN projects annual births +0.5 million, +24%
40+ year old females +9.6, +70%

Pakistan (#28 GDP, 0.3%)Pakistan 2020 – 2040
20-40 year old females +11.4 million, +33%
UN projects annual births +20k, +0%
40+ year old females +22 million, +86%

Philippines (#23 GDP, 0.4%)Philippines 2020 – 2040
20-40 year old females +3 million, +18%
UN projects annual births +145k, +7%
40+ year old females +10.7 million, +66%

Australia/New Zealand (#10 GDP, 1.7%)
Australia/New Zealand 2020-2040
20-40 year old females +350k, +8%
UN projects births +0, +0%
40+ year old females +2.3 million, +31%