Demographic Headwinds Arrive

The U.S. fertility rate is below replacement. Population growth is about 50 percent immigrants, and higher if you include native born children of immigrants because recent immigrants have higher average fertility. The current ban on immigration, likely to be a permanent policy, will eliminate the majority of population growth. A decline of 0.6 percent from economic growth gets one close to a target of around 1 percent GDP growth per annum. Even if there is some population growth, the marginal impact on sectors such as housing will be much larger than a linear extrapolation from population. Add in other factors such as aging of the population and the inefficient healthcare sector consuming ever more reasons as the country ages and the long-term outlook is not great for growth.

The chart below from RealInvestmentAdvice.com is far closer to a potential reality than is understood today. Their long-term growth forecast is 1.07 percent. My hunch is the coming decade will be more volatile than the last, and that the current recession will last longer than anticipated. Average growth could be around 1 percent, but it will come from much bigger losses early on and stronger growth in the later years. Either way, forecasting sub-1.8 percent growth is a high probability forecast until there is a deflationary credit collapse or a jubilee/currency collapse that wipes out debt.
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