Slowing Population Growth Boosts Per Capita GDP in 2nd Quarter

August 1, 2012

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Things have been a little crazy here lately and I’ve fallen behind once again.  So the news about 2nd quarter GDP, released on Friday (link provided above), is already a little stale.  But there’s a twist in that news that merits comment.

The Bureau of Economic Analysis (BEA) announced that growth in the nation’s gross domestic product slowed in the 2nd quarter to a very anemic annual rate of 1.5% from a slightly upwardly-revised figure of 2.0% in the first quarter.  So I expected that I’d be writing about a decline in per capita GDP to only 0.5% – very close to a recessionary level.

But that’s not the case.  When I crunched the numbers, per capita GDP actually held steady at an annual rate of about 1.1%.  Upon checking my numbers, I found that growth in the U.S. population, using data taken from the Census Bureau site, has actually slowed dramatically.  Here’s a chart of the percentage change in the U.S. population:   Quarterly U.S. Population Growth Rate

As you can see, although the growth rate in the 2nd quarter typically rises, it actually fell this time, to its lowest level since I started tracking it, with the exception of the correction that took place in the first quarter of last year as a result of the 2010 census.  But this isn’t just a one-quarter blip.  There seems to be an acceleration in the rate of decline in population growth over the past couple of years. 

The result is that there was actually a very slight up-tick in per capita GDP in the 2nd quarter.  In other words, every American is actually slightly richer as a result of fewer-than-expected people sharing the GDP.  Every American got a slightly larger piece of pie in the 2nd quarter because fewer Americans showed up at the table than expected.  Here’s a chart of per capita GDP:  Real Per Capita GDP

What’s going on here?  In my previous post, we learned that the fertility rate has fallen to a 25-year low, approaching the level needed to reach a stable population.  And, if the CDC (center for disease control) ever updates it’s data for death rates and life expectancy, I expect we’ll see that the death rate is actually rising slightly, primarily due to the effects of obesity, but due to the effects of rising poverty as well.  That leaves only immigration to maintain population growth and, so far, it doesn’t seem to be happening.  Has the administration been quietly ratcheting back on immigration too?  I don’t know, but it’s something I’m going to investigate.  More on this later.

In the meantime, the good news here is that slowing population growth is already yielding benefits for every American.


Economic Decline Impacting U.S. Fertility Rate

July 29, 2012

http://www.usatoday.com/USCP/PNI/Nation/World/2012-07-26-bcUSATBIRTHRATES_ST_U.htm

Here’s a piece of news from late last week that I certainly can’t let pass without comment.  As reported in the above-linked article, the U.S. fertility rate has declined from 2.12 in 2007 to 1.87 today, and is projected to decline further to 1.86 next year.  The reason for the decline, according to Demographic Intelligence, the company that gathered the data, is the economy.  Student loan debt and job insecurity makes it impractical for twenty-somethings to consider having children.

It’s an interesting observation.  Prior to the renaissance and the industrial revolution, poverty held the world’s population in check.  In recent centuries, economic development drove down death rates much more quickly than birth rates, fueling a population explosion.  Economic development and population growth became synonymous in the minds of economists.  But they are not synonymous.  They were cause and effect, up to a point – the point where overcrowding becomes an impediment to per capita consumption.  Now, the cause and effect have reversed.  Population growth has strangled economic development, driving up unemployment and poverty.  And now, poverty is resuming its role as the mechanism that will hold the population in check.  Not only is poverty driving up the death rate but, as this article makes clear, it’s reining in the birth rate as well.

A fertility rate of 1.86 is very close to the rate of 1.79 that I calculated as necessary to achieve a stable population.  (See page 178 of Five Short Blasts.)  A rate of 2.0 is what’s considered a “replacement rate,” the rate necessary to replace each previous generation with one of the same size.  But as long as life expectancy increases, then a rate less than 2.0 is required to achieve a stable population.

A declining fertility rate – finally approaching the rate needed to achieve a stable population – is great news.  But what happens now?  Will hand-wringing economists convince policy-makers that a stable population is a threat to macro-economic growth and that we need to flood the country with even more immigrants?  What a mistake that would be.