Pic-of-the-Week: Slowing Population Growth Becoming a Concern for Long-Run U.S. Growth (5/05/2014)

U.S. Population Growth Cut in Half the Past Twenty Years – Europe and Japan have long wrestled with the concerns of flagging population growth. Total headcount remains a key determinant of the overall size of any economy.

In the U.S., population growth has slowed by half since the early 1990s, from roughly 1.4% to only 0.7% currently. The decline picked up pace in the recent recession but is now leveling out a bit.

Slowing population growth is undoubtedly one of the factors underlying slowing real growth rates in the U.S. the past few decades. Think in terms of the simplest model of an economy, where output is equal to the number of persons times output per person. Grow (or slow) either one and you grow (or slow) the overall economy.

What underlies the slowing in population growth? Largely the same old story of declining birth rates. U.S. population has increased by roughly 50 million persons the past 20 years, but women in the U.S. are having roughly the same number of live births annually.

While the problem in the U.S. isn’t nearly as severe as in many other developed countries, further decline in the population growth rate will likely continue to weigh on the overall pace of economic growth in the U.S. going forward.