US population projections not as dour as Census envisions

The Census Bureau released its long-term population projections in November. They paint a more pessimistic outlook for the US than its last set released in 2017. We previously used the Census data as a basis for our long-term population forecast, but we are not convinced incorporating the new figures into our baseline is the correct approach because they do not seem realistic.

What you will learn:

• Lower births rates, slower net migration, and higher death rates in the updated Census projections yield 13 million fewer residents than our baseline forecast by 2050 and 22 million fewer than recent projections from the Congressional Budget Office. The Census figures envision a rapidly ageing population, with the share of those aged 65 or more raising from 22% to 23%.
• The migration estimates appear too pessimistic given how reliant the US will be on immigrants for labor supply growth. Birth rates are assumed to fall throughout the projection. This is partially impacted by lower migration, as immigrants tend to have higher fertility rates, but we believe it does not fully capture the recent rise in fertility rates amongst older women due to delayed childbearing, which should offset falling rates among younger women.
• Weaker population growth would reduce the economy’s potential output absent a significant increase in trend productivity growth. Using our Global Economic Model, we estimate the potential level of GDP would be 5% lower by 2050. Potential growth would be a paltry 1%, or less, per annum. The smaller tax base would reduce government revenues, while an accelerated ageing in the population would make Social Security and Medicare programs even more expensive, leading federal debt as a percentage of GDP to reach 160% during the same period.