The US population is growing at a declining rate and, without immigration, it will not grow at all in the 2030s and 2040s.
In the years following WW2 and until the mid 1960s, the US population grew by an average 1.6% per year. From the late 1960s to 2007, it grew by an average of 1% per year. Since then, the growth rate has fallen under 1%. On my calculations, it will remain below 1% for several decades and will fall well below 0.5% in the 2030s and 2040s. Without immigration, the size of the total population would flatline or shrink moderately in those decades.
Many, or possibly most, commentators mistakenly believe that US demographic growth will be robust for decades to come. This misconception is due in part to the fact that Europe and Japan have very poor demographics in comparison to the US. The number of Europeans and Japanese is indeed expected to decline while the American population continues to grow. But the rate of US population growth will also be declining for the next several decades.
It is widely known that immigration has been and will continue to be a key component of growth for the US population, but immigration is seen by many as an addition to the organic growth of the existing population, when in reality it will be the only source of growth in the 2030s and 2040s when organic growth will be flat or negative.
A recent report by the Census Bureau stated that the US population grew in 2011 at the lowest rate since 1940. It is a headline which will appear frequently in the future because population growth will be more or less level until 2020 and then it will fall until the late 2040s. The reason for this unusual phenomenon is quite simple. Due to the baby boomers' passing and a relatively lower birth rate in recent decades, the number of deaths will rise quickly while the number of births rises slowly.
The annual net addition to the population is the number of births minus the number of deaths plus the number of new immigrants. Every year, legal immigration adds about 1 to 1.1 million people to the US population. In the 2030-39 decade, on current trends, the number of births will match or fall slightly short of the number of deaths and the population will grow only due to immigration.
In order to quantify the growth of the population, we need to consider two main factors: First, how many births are likely in the coming years? Assuming the birth rate remains steady at 11 children per 100 women aged 20-40, there will be 4.2 million new babies in 2015, rising to 4.3 million in 2020, 4.4 million in 2030, 4.6 million in 2040 and 4.7 million in 2050.
Second, how many deaths will take place every year? This is a bit more difficult to predict because we need to quantify the number of Americans in each age segment today and to estimate the years of their deaths based on the life expectancy of each age. How many 40-year olds are alive today and what is the likely year of their passing? How many 41-year olds, 42 year-olds etc? For example, we estimate from US Census data that there are today 4.5 million Americans aged 50. Their life expectancy according to the Center for Disease Control is 31 years. A crude conclusion therefore would be to estimate that there will be 4.5 million deaths in 2043, excluding any deaths in that year of immigrants and their children who will have come to the US in the intervening years 2012-2043. (Obviously, not all people aged 50 today will pass in 2043, but there will be in that year additional deaths from people who are now in their 40s or 50s.)
Using this approach for every age, we estimate that the number of annual births in 2015-19 will approximate 4.2 million and the number of deaths 2.6 million, yielding an annual addition of 1.6 million to the US population. Adding 1 million more people to account for new immigrants yields a net annual addition of 2.6 million, a number which is consistent with the 2.8 million addition just announced by the Census Bureau for the period from April 2010 to July 2011. Immigration only added 703,000 people in 2011 because of the sluggish economy. A 1 million annual addition from immigration is therefore predicated on a stronger economic recovery.
The number of births fell steadily between 1921 and 1933 and did not fully recover until 1943. The dip in the 1920s and early 30s explains why the number of deaths has stagnated at around 2.4 million annually in the decade since 2000. But the subsequent recovery in births in the late 30s and in the baby boom years means that the number of annual deaths will also pick up in the remainder of this decade and in the 2020s.
Absent major changes in life expectancy and without the effect of future immigration, we estimate that there will be 31 million US deaths in the 2020-29 decade or 3.1 million per year, 46 million deaths in the 2030-39 decade or 4.6 million per year, and 48 million deaths in the 2040-49 decade or 4.8 million per year. Because the number of births will grow more slowly, the net annual additions to the population will fall from 2.6 million in 2015-19 (including immigration), to 2.3 million per year in 2020-29, to 0.9 million in 2030-39, to 0.8 million in 2040-49. In these last two decades, the number of births will be less than the number of deaths, which means that all of the US population growth will come from immigration. This analysis assumes no major changes in life expectancy, a stable birth rate, and annual immigration of 1 million newcomers.
Illegal immigration is not factored in any of these figures, but its impact is likely to be negligible unless the numbers turn out to be greater than currently estimated.
The economic consequences of declining population growth are likely to be far reaching. Many sectors of the economy which have been conditioned to expect higher population growth will be negatively impacted. These include housing, retail, travel and a host of others which have benefited for years from annual population growth of 1% or more and which will have to adapt to growth of less than 0.5% for a couple of decades. Some sectors may experience additional pressures from even lower (or even negative) growth in their target demographic segments. Manufacturers of finished goods should fare better since they can make up the slack in domestic demand by selling more abroad.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.