HELP & SUPPORT LOCATIONS CONTACT US LOGIN Our Solutions Who We Serve Insights About Us Search Demographics and Growth Michael Fung, CFA Senior Vice President, Portfolio Manager February 8, 2021 INVESTING & ECONOMY Share Time to re-evaluate your financial future? Our wealth management professionals can help. Learn More . Get in touch For more information about our wealth management services, call 844-251-0099 Email Us Home Insights Investing & Economy Demographics and Growth Changing demographics are likely to impair economic growth in the coming decade. For generations, healthy birth numbers and robust immigration growth have powered an average population growth of over one percent; a rate other developed countries envy. However, the Great Financial Crisis of 2008-2009 may have permanently damaged our country’s desire for child rearing. The average population growth slowed to 0.4% in the subsequent ten years. As a result, economic growth drifted down by a similar percentage. By simple calculation, economic growth is a function of the number of customers multiplied by the average value of their basket of goods. Source: J.P. Morgan Asset Management The Great Financial Crisis reduced job opportunity and hampered social mobility. The economy needed more than six years to recoup all the jobs lost, however labor participation is still far below the pre-recession highs. A record number of people fell into long-term unemployment which made them less employable. A large percentage of homeowners owed more than their depressed house value and were unable to move and seek better opportunities. These poor economic conditions caused a meaningful drop in the marriage rate and births. Source: Center for Disease Control and Prevention Demographics have imprinted slow growth into our economy which is difficult to erase. As shown in the table above, nearly 600,000 fewer babies were born in 2019 than in 2007. Alongside the growth in online shopping, people having fewer babies has already hurt traditional storefront retailers. Toys “R” Us, the country’s largest dedicated toy and baby retailer, went bankrupt in 2017. In the coming years, brick and mortar teen retailers may face a similar fate if online retail has not already overtaken them. Twelve years from now, half a million less American kids will graduate from high school meaning less public educational employment. More colleges may close their doors from lower enrollment. Declining population in Japan hindered sales and profit growth of businesses and reduced economic vitality. Our economy could face a similar fate. The Trump administration also contributed to slower population growth by tightening standards for immigration. As a result, the working population growth derived from immigration slipped to 0.2% from 0.6%. J.P. Morgan Asset Management forecasts that working population growth should further decelerate to 0.2% in the coming decade. However, immigration policy could be reversed by the new administration. The path of US demographics is not necessarily destined to follow that of Japan. Strong employment and robust wage growth may heal our demographics challenges. However, achieving such an ideal outcome, has perplexed most economists and politicians. Russia provides an example of a different solution. It has been one of the few countries in the Western Hemisphere to have succeeded in reversing a declining fertility rate. Vladimir Putin’s regime enacted generous birth legislation to encourage larger families. Policies included payment for the birth of a child, extending the duration of paid maternity leave, paid childcare benefits for up to 18 months, and subsidies for preschool education. Annual births in Russia have since jumped nearly 50%. Mitt Romney’s proposed $350 monthly payment per child and Democrats’ support for a fully refundable child tax credit show positive momentum in reducing the burden of raising children. The US does not need dramatic improvement, but stabilizing the current fertility rate would be helpful in sustaining healthy economic growth and renewing the aging workforce to help support the programs and social safety nets that the growing elderly demographics will need. We continue to monitor the impacts of changing global demographics across industries and geographies, particularly as it relates to investment trends and asset allocation shifts. You May Be Interested In Previous WEALTH PLANNING Women Have Taken a Retirement Hit this Past Year – How Can They Recover? MARKET PERSPECTIVES Fall 2021 Market Perspectives AUDIO / VIDEO Q3 2021 Wealth Management Update Next Our Solutions Wealth Management Business & Commercial Banking Private Banking Who We Serve Individuals & Families Businesses Nonprofits & Institutions Insights Investing & Economy Market Perspectives Wealth Planning Trusts & Estates Elder Fraud Prevention Credit & Lending Cybersecurity News & Updates Audio / Video About Us Our Approach Heritage & Values Community Commitment Sustainability Careers News Investor Relations Follow Us LinkedIn Twitter Facebook Privacy Disclosures Copyright © 2021 Cambridge Trust. All Rights Reserved. NMLS Unique Identifier #697495 Investments are not FDIC insured May lose value Not bank guaranteed Not a deposit Not insured by any government agency