by Pierre G. Villere
As they say, “this too shall pass,” and when we come out on the other side of current Covid-19 and social unrest stresses on our society, there are some tectonic demographic changes coming over the next decade that will dramatically change our business, and the economy as a whole.
In 2019, the Census Bureau reported that Millennials surpassed Baby Boomers as the nation’s largest living adult generation. Millennials, whom we define as ages 23 to 38 as of 2019, numbered 72.1 million, and Boomers aged 55 to 73 numbered 71.6 million. Generation Xers, aged 39 to 54 and numbering 65.2 million, are projected to pass the Boomers in population by 2028.
The Millennial generation continues to grow as young immigrants expand its ranks. Boomers are aging and their numbers shrinking in size; with immigration adding more numbers to their cohort, Millennials’ population is projected to peak in 2033, at 74.9 million. Thereafter, the oldest Millennial will be at least 52 years of age, and mortality is projected to outweigh net immigration. By 2050, there will be a projected 72.2 million Millennials in the United States.
For a few more years, Gen Xers are projected to remain the middle child of the current generations, caught between two larger cohorts, the Millennials and the Boomers. Surprisingly, when Gen Xers were born, births averaged around 3.4 million per year, compared with the 3.9 million annual rate from 1981 to 1996 when the Millennials were born. Gen Xers are projected to outnumber Boomers in 2028, when there will be 63.9 million Gen Xers and 62.9 million Boomers, who peaked at 78.8 million in 1999 and remained the largest living adult generation until 2019. By midcentury, the Boomer population is projected to dwindle to 16.2 million.
What does this mean for our industry and the economy? Demographers and financial analysts seem to concur that matching of the economic performance of the latter part of the 20th century due to the introduction of the internet, as well as the implementation of new communications and computing technologies, will be challenging. As a result of those giant leaps in technology, labor productivity advanced by an extraordinarily rapid 3.0 percent annualized rate from 1997 to 2000. That breakneck rate of productivity growth supplied a whopping 4.5 percent average annualized surge to U.S. GDP.
In addition, U.S. economic growth from 1997 to 2000 was spurred by very favorable demographic changes. During that window, the number of Americans aged 20 to 64 years, a proxy for the U.S. working age population, grew by an outsized 2.25 million annually on average, while the number of those aged 65 years and older rose by merely 227,000 annually. By contrast, the demographic outlook for the next 10 years differs drastically from the very rapid U.S. real GDP growth of 1997-2000. For the 10 years ended 2030, demographers project average annual increases of only 241,000 for the number of Americans aged 20 to 64 years and 1.676 million for those older than 64 years.
Only if the average annual rate of labor productivity growth far exceeds its 1.2 percent rise in the 10 years ended 2019 might the average annual rate of U.S. GDP growth well surpass 2 percent through 2030. Achieving labor productivity growth of at least 2 percent on a recurring basis probably requires another wave of technological innovation, especially as Millennials flood the labor markets.
The challenge for the economy, and our industry in particular, is to supplant the Millennials for the productivity and work ethic of the Boomers who preceded them, and only then will we match the economic performance of the late 20th century.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at [email protected]. Follow him on Twitter – @allenvillere.