Self-explanatory, and they come via RBC Capital Markets: Read more
Quite a few analyses of the sequestration cuts have noted that they do little to address the sources of longer-term budget deficits, which are mainly the result of expected health care costs.
Matt Slaugher of Tuck Business School and Matthew Rees of Geonomica argue something similar but take a slightly different approach, emphasising which generations the cuts are punishing most: Read more
We’ve recently heard an interesting suggestion that China’s ageing population — generally a bad thing for growth — might also have the positive side-effect of inducing a transition away from the country’s unusually high ratio of investment to consumption. But will it? Read more
Yep, China again.
Here’s a table from a fresh IMF paper pondering the country’s Lewis Turning Point, the moment when people streaming into cities from farms will be fully absorbed, industrial wages will take off, and — an estimated 350m jobs later after it began — the era of cheap Chinese labour will end. Click to enlarge. Read more
China’s growing demographic challenges have been well documented and their economic impact much discussed. So how about urbanisation being touted as the solution?
After all, more people working in cities generally means more productive workers, hard to argue with that. But Beijing’s traditional policy of encouraging urbanisation through greater infrastructure investment is getting ever diminishing returns. If the government really wants more people to move to the cities, argues Wei Yao at Société Générale, it must start treating its new urbanites better. Read more
We’ve been moaning about the old stealing our jobs for quite a while but we may have been missing an obvious trick. Much like their advanced toilet habits, Japan is leading the way demographically and has come up with an alternate to our more “soylent green” approach to the problem. Read more
If increased proportions of older workers are squeezing out some of the younger would-be workers there could be a significant downside in the longer term — ironically, due to the ageing population. Read more
From Steven Englander at Citi — a little observed factoid regarding employment trends among the older demographic:
We are taking one small slice at this subject, starting with the little noticed fact that employment to population ratios among older individuals have gone up in recent years, in contrast to the so-called prime-aged 25-54 cohort, where employment to population is much lower than earlier. Figure 1 shows the percentage point change in the employment to population for the three age groups since 2007. Read more
To what extent has Japan’s soft growth over the past 20 years been due to its population ageing? And to what extent unfavourable demographics can be offset by increases in labour market participation (especially by old people) and/or labour productivity gains?
Citi’s Nathan Sheets and Robert Sockin have put together a very useful comparison of (mostly supply-side) measures for the US, Japan and eurozone that examine these questions. They’ve “decomposed” real GDP-per capita down into labour productivity, employment rate, labour force participation, and the share of the working-age population. Read more
Making babies is fun and good for economic growth (sexing up a lede has never been so easy). Nomura has taken a shot at calculating just how significantly population changes can hit GDP. Their conclusion is that:
[A]lthough a population decline will dent GDP growth and inflation, the degree of correlation is not that high and the negative impact may not be as large as some observers fear. Read more
This chart from Credit Suisse is included in a note about the graying of America and the developed world’s demographic problems and future runaway deficits and frightening old-age dependency ratios and blah blah bliggity blah…
These are difficult issues and we’ll continue to write about the financial and economic implications of same, but this blogger returned from holiday about five minutes ago and feels like looking on the bright side of things for just one post. So instead we’re going to think about this in the happier and more obviously humane context of living standards rising and people living longer: Read more
We’ve seen a lot interesting and deservedly favourable commentary about Alex Tabarrok’s argument that liberalising high-skill immigration policy in the US would be an economic boon.
Hey, we’re all for it – and it’s more politically feasible than wider substantive reform on illegal immigration, in part because its entrepreneurial and societal benefits are intuitively easy to grasp. Read more
Fascinating data point via the Brookings Institution:
The new Census results show 49.8 percent of infants under age one are members of a race-ethnic minority – up from 42.4 percent in 2000. Given this trajectory, and the fact that the Census was taken well over a year ago, it is almost certain we have now “tipped” racially, and more than half of all national births are minorities. More than a quarter of infants are Hispanic, Blacks and Asians comprise 13.6 and 4.2 percent, respectively. Nearly one in twenty births were reported to be two or more races. Read more
A decent review of a theme we’ve been exploring recently, courtesy of Moody’s Analytics:
Several important demographic trends will influence US activity for some time. They include (i) the slower growth of Americans aged 15 to 49 years, which is a population cohort that shows a comparatively strong correlation with the growth of real consumer spending, (ii) the record slow growth of the working age population, (iii) the much faster growth of older workers relative to younger workers, and (iv) the breakneck growth of those 65-and-over vis-à-vis the number aged less-than-65. Read more
Interesting USDA chart, pointed out by Big Picture Agriculture:
This morning’s miserable new home sales report gives us an excuse to write about a theme we’ve been distantly following for some time: the possibility that the housing downturn has overshot the pre-crisis boom and will eventually provide an economic boost when it corrects.
Whether this turns out to be the case depends on whether demographics can trump the recent adjustments in household behaviour, as a recent paper from RBC explains: Read more
The rankings of the new Global Aging Preparedness index from the Center for Strategic and International Studies — or, handicapping the Race to Sovereign Default 2040:
Relax, kids: a demographic tidbit from Citi’s emerging market round-up on Monday:
China will relax the one-child policy in five provinces this year and probably switch to the two-child policy within five years. According to the Chinese Liaowan Weekly, under the new policy, all couples with a one-child family can have two children. Read more
An interesting application of political science to the market, from Deutsche Bank analysts:
Youth bulges in emerging markets likely to decline sharply from 2010–2020 Read more
By now you’ve perhaps heard about the ticking, aging timebomb underneath Japanese government bonds. Or predictions of a negative savings rate. Or sovereign downgrades.
But what of the super safe Japanese mortgage market? Read more
Nomura’s Richard Koo — he of ‘balance sheet recession’ fame — has been inspired.
He’s spent a week with Chi Hung Kwan, of the Nomura Institute of Capital Markets Research and an all-around China expert, and come back with the discovery that the “conventional wisdom on [the] Chinese economy has begun to collapse.” Read more
Japan has just announced that its national savings rate rose to 5 per cent in 2009, from 2.2 per cent in 2008. But already some analysts are predicting a sharp reversal in the trend. Goldman Sachs’ Chiwoong Lee thinks the rate is about to turn negative.
From a Monday note: Read more
They are the ultimate consensus trade inside the ultimate consensus trade.
They are consumers in China. Read more
A companion piece, of sorts, on the merits of killing the old.
Morgan Stanley’s analysts recently made a diverting little demographic case against deflation ever entrenching itself in the West. While this did happen in Japan, they said, that was because the Japanese are just too damn old to get themselves out of the pickle. Old people also effectively dictate Japanese politics into the bargain. But demographic deflation can’t happen here. Read more
Morgan Stanley economists always have such interestingly contrarian views on the inflation-deflation debate. For example – Joachim Fels’ unfashionably inflationista analysis of central bank credibility.
And now — the deflation-fighting case for Logan’s Run. Read more
Paging Martin Wolf. Given recent coverage of global imbalances stalking the market and, uh, teenager-backed bonds on FT Alphaville, here’s an intriguing Goldman note on the role of demographic factors in future current account imbalances.
Intriguing, because the imbalances look like they’re going to get a bit sharper, much sooner — and with a much more middle-aged appearance. Read more
BIS analyst Előd Takáts is worried about ageing, reports FT Alphaville. And not in a personal way, either. In a caveat-heavy but very interesting Bank for International Settlements working paper, the economist seeks to investigate how ageing populations will impact asset prices — specifically, housing. While he doesn’t forecast a 47 per cent “meltdown” in asset prices — a la Mankiw and Weil in 1989 — he does expect “some significant negative effects”. Read more
Japan is getting older. The older it gets, the more it relies on demand from emerging market consumers. That’s why Japan has decided to make a shopping holiday a little bit easier, according to the FT’s beyondbrics blog. The Japanese foreign ministry on Tuesday announced it will in July ease its requirements for tourist visas for individual Chinese, a step that national broadcaster NHK reckons could help raise the number of visitors from Asia’s fastest rising economic power roughly sixfold to 6m by 2016, beyondbrics reported. Read more