Why Is Population Growth So Important to the Economy?


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For the full transcript, click on the Notes tab on the podcast player for this episode on our website: www.NewsForInvestors.com.


00:00:00 Intro Music

[Speaker] Kathy Fettke: With all the talk about the housing gap, you might think it’s because we have very strong population growth. But in reality, the opposite is true. The birth rate has dropped again, and population growth is close to zero.

Hi I’m Kathy Fettke and this is the Real Estate News for Investors. Please take a moment to subscribe to our podcast. It helps us rank, and helps people find us!

This episode is all about the status of the U.S. birth rate and population growth, because it’s so important to the present and future health of our economy. The economy needs to growth and for that to happen we need workers. A low growth rate now, means fewer workers in the coming years.

Status on Birth Rate, Population Growth

The U.S. has experienced a low birth rate for about a decade, and continues to dip below a threshold needed to replace people who are dying. The official U.S. birth rate for 2020 is 1.64 which is the average number of children born to women of childbearing age. The threshold amount is 2.1. And that’s bringing total population growth down. (1)

As reported by the Wall Street Journal, preliminary figures show that the population growth rate was just .35% in the fiscal year that ended on July 1st, 2020. (2) Demographers are expecting that figure to remain flat, or near flat, for the current year. Some also say there’s a chance our population could shrink.

Why This is Important

As I mentioned, population growth is an important part of the labor market, and the strength of the nation’s economy. Demographers say they are not overly concerned about one bad year, because the growth rate usually bounces back in step with the economy. But after a peak in 2007 and the subsequent recession, they say the birth rate never recovered and has been drifting down since then.

Economists Melissa Kearney and Phillip Levine say many young women avoided pregnancy because of the pandemic and economic uncertainty. They expect that to result in 300,000 fewer births this year. Data has already become available showing a decline during the first quarter of the year, compared to last year.

Before the pandemic, the decline was partially due to millennials postponing their family plans, women placing more importance on their careers, and financial issues stemming from the Great Recession. Covid-19 only compounded the situation.

U.S. vs. Other Countries

A researcher at the conservative American Enterprise Institute, Nicholas Eberstadt, says that despite all those impacts on the U.S. population, we are actually doing much better than other countries, such as China, Russia, and nations in the European Union. He says the big wild card for the U.S., right now, is immigration.

Brookings Institution demographer, William Frey, agrees with Eberstadt. He told the Journal that he doesn’t think population growth will turn negative, thanks, in part, to immigration.

Over the last ten years, demographers say that immigration has boosted population by 30 to 50%. It has dropped due to recent restrictions, but at least some of those restrictions are being lifted by the current administration. And that could help offset the lower birth rate.

Other Issues Impacting Population Growth

The U.S. should also see a boost in the numbers as fewer people die of Covid-19. But the Journal cites other issues that are putting pressure on mortality. One is a rise in drug-overdose deaths, along with an increase in homicides. Some chronic diseases are also lowering life expectancy, which is also happening because of the pandemic.

As for birth rate demographics, the Journal says that “every type of U.S. county, from the most urban to the most rural, on average saw a decrease in the number of births per death in the second half of the 2010s compared with the first half.”

That’s according to data from the U.S. Census Bureau. The situation is more pronounced in rural areas however, where there are fewer jobs, less housing, and hard-to-find child care options that growing families need.

As for worldwide population growth, I’ll close with a few interesting statistics from Pew Research.

According to a 2019 report, world population has been increasing by 1 to 2% per year, and has grown from 2.5 billion in 1950 to 7.7 billion today. But the fertility rate is falling. It cites a 2.5 fertility rate in 2019 that is expected to drop to 1.9 in 2100, which is below the replacement threshold of 2.1.

Africa is the only country that’s expected to have strong population growth throughout this period of time. Asia is second. Population growth in Europe and Latin America is expected to decline.

Pew Research says that people migrating to the U.S. will contribute the most to U.S. population growth in the coming decades. It’s projecting the U.S. that 85 million people will migrate to the U.S. during the remainder of this century.

You’ll find links to our sources in the show notes. You'll also find a link to join our RealWealth network of investors. It's free and easy to join. As a member, you'll have access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

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I’m Kathy Fettke and this is Real Estate News for Investors.

00:05:40 End

Go to www.NewsForInvestors.com for the show notes.


1 - https://www.brookings.edu/blog/up-front/2021/05/24/will-births-in-the-us-rebound-probably-not/

2 - https://www.wsj.com/articles/u-s-population-growth-slows-birth-rate-decline-economic-risk-11627231536?mod=searchresults_pos6&page=1

3 - https://www.pewresearch.org/fact-tank/2019/06/17/worlds-population-is-projected-to-nearly-stop-growing-by-the-end-of-the-century/

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