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U.S. Population Growth Lowest In 100 Years: Business & Economic Implications

Bill Conerly

The United States population grew by less than half a percent last year, according to estimates just released by the Census Bureau. This is the lowest growth rate since the Spanish flu killed 675,000 people in 1918. Slower population growth will accentuate the labor shortage and dampen demand for new housing and other durable goods. This article briefly explores the causes of the slower growth, then considers implications for the economy and business planning.

More deaths and fewer births—natural population increase—was the biggest factor, followed by a slowdown in foreign immigration. The death rate rose as more boomers enter higher-mortality ages. Birth rates fell as millennials are either having fewer babies than past generations did at their age, or they are delaying child bearing.

Net foreign immigration also declined sharply last year, continuing a trend that started in 2017. Given all the talk about U.S. immigration policy, President Trump could declare that he achieved his goal without a wall, or claim that he got Mexico to pay for an invisible wall.

The greatest impact of this new data will be on the labor market. Although the slowdown in the natural increase (births minus deaths) does not impact the working-age population much, the drop in foreign immigration does.

The outlook for the working age population was pretty dim when the Census Bureau last updated their long-term projections in 2017. The latest data are far gloomier. Net international migration is coming in much lower than those past projections:

2017: -6.7% (actual compared to Census Bureau’s projection)

2018: -30%

2019:  -41%

The working age population would grow by the fewest people since the Civil War, in the Census Bureau’s old projections. Two years ago I displayed The Scariest Chart for Business in the Coming Decade, showing hardly any expansion of the working-age population from 2020 through 2030. That chart now appears optimistic. (The bureau will update their projections later in January 2020.) As two recent business surveys show, tight labor markets will be the top business challenge in 2020.

Businesses will increasingly turn to robotics and automation, according to workplace expert Cam Marston, president of Generational Insights, a workplace consultancy: "Low population growth will also make employers turn their eye towards robotics and automation to maintain or increase productivity. Recruiting and retaining people is difficult as it is and will be exacerbated by low population growth. Investments in robotics and automation is a big capital expense but robots don’t ask for raises and they don’t quit to take other jobs.”

On the spending side of the economy, housing demand will see the greatest impact of slower population growth. Housing is built for people, of course, and housing lasts a very long time. Thus, most new housing fills demand from population growth and relatively little replacement of obsolete properties. The lower birth rate reduces demand for move-up housing—larger apartments and houses. The higher death rate puts more housing on the market (though some housing remains occupied by the deceased’s family members). The slower foreign immigration reduces housing demand, especially at lower price points.

Consumer spending growth will also slow a small amount as a result of the population changes. Because so much consumer spending is replacement and replenishment, rather than net new demand, slower population growth has less impact. Nonetheless, sellers of consumer durable goods, such as cars, furniture and appliances, will see slower growth rates in the coming years than in past decades.

The latest Census Bureau data did not get big headlines, but the impact on business in the coming years will be greater than most other news this year.

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