For much of the last century, population growth in the U.S. has remained relatively stable. But that is changing, and your business should prepare now.
In our recent Market Pulse podcast , Wayne Best, Chief Economist at Visa, discussed the findings from Visa’s new white paper, The Golden Years: Planning for the Changing Face of the United States.
During the pandemic, many people were focused on the economy next month or next quarter. But Best said his wanted to go beyond that and take a long-term view with this research.
“We looked at where we see the economy going, what that means for consumers, and what it means more importantly for businesses as they plan for this changing face of the U.S. consumer.
Listen to our Market Pulse podcast to find out how your business can take advantage of these population shifts.
The Heyday of Stable Population Growth is Over
The last U.S. census taken in 2020 showed population growth has slowed to just 0.35%. That is the slowest growth rate since 1900. By comparison, the U.S. population in 1950’s and 1960’s was around 2%, while the 1970’s and 1980’s slowed to around 1-1.5%.
Best said there are several reasons for this dramatic shift.
First, the U.S. population is having fewer children.
Second, Baby Boomers are aging and starting to die off. They were the largest generation in history until the Millennials.
Finally, immigration has slowed, which affects the workforce and other factors.
The Graying of America
A long-term trend to watch is the aging of the U.S. population, said Best. That is represented by the working age population who are 18 to 64-years-old.
“In 2016, they represented 62% of the overall population. But by the time we get to 2030, that is going to slow to 58%. In that same time period, the age of 65-year-olds or the proportion they are representing of the overall population, will go from about 14% to as much as 22%,” he said. “The labor force really is going to suffer.”
Furthermore, the pandemic accelerated the rate of early retirement.
“People not in the labor force now 65-plus is almost two million more than what we would've expected in normal times,” Best said.
Will the GDP Suffer? Will My Business Suffer?
It’s a perfect storm: slower population growth, aging of the population, smaller labor force, the recent surge in retirements, and that slowing immigration factor. Combined, these factors will have a seismic impact the GDP.
“The long run potential growth rate is frankly going to dramatically slow. We're going to a see real potential GDP growth going from 3%-plus back in the '90s to 2.5% over the last couple of decades to 1.8% or so in the current period. That's a dramatic shift,” said Best.
Furthermore, consumer spending growth will slow, and that means businesses will work harder for customers.
“No longer are we going to have all this low hanging fruit on which to pick from in terms of potential customers. And that will be a dramatic shift that we all need to plan for in business,” warns Best.
How Does My Business Adjust?
People have predictable spending habits, according to Best. They are often based on age and when individuals graduate college, marry, have a child and other life events. Businesses can leverage this information to better segment their customers and potential customers.
“We need to make sure that we're thinking through our plans and thinking through our business much more segmented than previously. Good old segmentation, that marketing buzzword from the '90s that everybody hated, it's back,” he said. “And it has to be back now because the overall size of this economy, that's potential growth, the amount of consumption is just not going to be at the pace that we've seen previously.”
Listen to the full interview or explore other episodes of our Market Pulse podcast.