By Russ Koesterich
Demographics, a subject normally confined to academia and a once-a-decade census, is experiencing a revival.
Economists and journalists are increasingly turning to the topic in order to explain everything from developed countries' relatively slow growth rates to their low level of interest rates. In my mind, this is a useful discussion. Populations' growth rates and age profiles have been shown to have important economic and investing implications.
As such, I read a post over at The Wall Street Journal's Real Time Economics blog, Forever Young? America Stays Relatively Youthful Even as World Population Ages, with interest. The post points out that while the United States is aging, it's aging at a much slower pace than much of the rest of the world.
According to the post, by 2050, about 21% of Americans will be aged 65 and up. This compares favorably with expected levels in both Japan and Europe. In Japan, the country with the worst demographics, the percentage will be 40%. Even China, still a developing country, will be older than America, with over 26% of its population 65 and above.
The good news for the United States is that a relatively young population suggests a faster growing workforce, which in turn should translate into faster economic growth, at least relative to Japan and most of Europe.
However, while the United States will be younger on a relative basis, the country will still be older than it is today and much older than it was 40 years ago. The 21% of the population over 65 by 2050 compares poorly with just 13% in 2010 and less than 10% in 1970. With the U.S. population almost certain to continue to age, what are the implications for the U.S. economy and financial market? Here are three.
