A number of my white papers and blog posts have focused on population growth which is a key component of overall economic growth. Specifically, economic growth is equal to the sum of growth in the working population and growth in the amount of output for each hour worked. (Known as productivity growth) Over the past sixty years, economic growth has averaged about 3% consisting of annual population growth of 1% and productivity growth of 2%.
On December 21st, the U.S. Census Bureau released data for 2021 indicating that the U.S. population grew by just over .1%, the lowest level since our nation’s founding! This astonishing lack of growth is attributable to three factors. First, the nation’s fertility rate (Number of births per woman) continues to decline as it has since the late 1950’s. Second, mortality increased with Covid-19. Combing these two factors, the natural increase in population which is defined as the excess of births over deaths was a mere 148,043 or .04%. The third factor is net immigration which amounted to 244,622 or .07%. In fact, this is the first year on record in which net immigration exceeded the natural growth in population. For perspective, the net immigration figure of 244,622 compares with an annual range of 700,000 to 1,045,000 from 2010 to 2016.
What does this all mean? The Congressional Budget Office forecasts average economic growth over the next ten years of just under 2%. How will that target be achieved? We can hope for a slight improvement in population growth as Covid-19 mortality decreases, but it was running at just a .45% rate prior to the pandemic which suggests that large changes are unlikely. Therefore, the outlook for economic growth falls largely on productivity growth which has only averaged 1.2% over the past ten years. I am optimistic that large investments in artificial intelligence, robotics, and other technologies will finally pay off in the form of a surge in productivity. But, we haven’t seen it yet so keep your fingers crossed!