Graying America, Aging World

For Immediate Release: America Is Getting Older

Source: https://www.census.gov/newsroom/press-releases/2023/population-estimates-characteristics.html

The demographic bombshells keep dropping.

The U.S. Census Bureau released in June its latest status report on the country’s population. While an aging population is a well-understood phenomenon, the eye-popping statistic is that the median age in the country has jumped to a record high 38.9 years. The country’s aging process is happening fast. In 1980, the median age was 30. Twenty years later it was 35. At this rate, in just a few years, the median age in the U.S. will top 40. Fewer workers supporting ever more retirees is a bad combination.

Source: https://www.wsj.com/world/china/chinas-fertility-rate-dropped-sharply-study-shows-e97e647f

This month’s bombshells are centered in the world’s biggest populations. China reported that the country’s fertility rate had dropped to 1.09 in 2022, down from 1.30 in 2020 and startlingly below the 2.1 required to keep a country from shrinking. Accordingly, China also released data that its overall population had declined in 2022 for the first time since 1961. The final bombshell: India has surpassed China as the world’s most populous country.

We last wrote about demographics and investment implications in June 2019, but that was before Covid hit the accelerator. Covid accelerated the aging of the United States because immigration came to a screeching halt. Immigration has historically put downward pressure on the population’s aging process because most immigrants are much younger than the median. While immigration is recovering from the pandemic lows, it has still slowed significantly since 2016.[1] True, we are working through the aftereffects of the pandemic, but there is still a long way to go before we reach equilibrium. Who knows what the eventual in-person work scenario will look like? One obvious victim is office and commercial real estate, which continue to gyrate and will take years to even out.

The ramifications hit many sectors in the economy:

• Medical device manufacturers are poised to benefit from an aging population. Like it or not, older people spend more healthcare dollars than their younger compatriots. Hip replacements, knee replacements, stents, cataract surgery, hearing aids, etc. are commonplace among the aging Baby Boomers.

• As people age, their need for pharmaceuticals goes up. Drug manufacturers and biotech developments will maintain this trend as the need for new and improved drugs increases.

• Assisted living facilities and nursing homes are an obvious beneficiary of an aging society. Where the country used to care for the elderly at home with large, youthful families, this is no longer possible. Assisted living facilities and nursing homes fill this necessary gap.

• Financial services are a growth industry in an aging society. As the population retires and begins to live off their savings, pensions and social security, financial planning plays a critical role in providing a framework for a comfortable outcome in retirement.

• Technology, robotics, and automation are all drivers of higher efficiency and will flourish with fewer workers. Examples include: self-driving forklifts are becoming commonplace in automated warehouses; self-driving tractors are catching hold in ever-more-automated farms.

Source: https://www.thoughtco.com/names-of-generations-1435472

Despite alarming population trends, overall commerce forges on. “The loss of jobs to China ended around 2010, while the creation of new jobs linked to trade with China continues. U.S. exports to China amounted to $192 billion in goods and services and supported more than 1 million U.S. jobs in 2021.” (https://www.washingtonpost.com/opinions/2023/08/18/china-economy-deflation-debt-analysis/) India’s population continues to grow and is forecast to peak at 1.7 billion by 2063. India is the fastest growing “wearables” (smart watches and the like) market in the world. China’s decline will be offset by rapidly growing countries.

Additional growth industries in an aging society are in leisure activities (pickleball!), travel, and entertainment. How will our elders get to their events? An aging population will make growing use of mobility services, like Uber and Lyft. Fertility services is also a growing industry as women wait longer to have children. Opportunities arise in spite of, and often due to, demographic shifts.

Retirement is a relatively recent phenomenon. A hundred years ago, people worked until they weren’t able to work any more, then their families took care of them. Large families could do that. Smaller families today cannot bear the same burden. As the country and the world grapples with its demographic challenges, ACM’s portfolios are constructed to benefit from the graying environment.

[1] https://www.census.gov/library/stories/2019/12/net-international-migration-projected-to-fall-lowest-levels-this-decade.html

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