Uncommon Truths: Don’t Shoot the Messenger
Key takeaways
Falling fertility
The decline in fertility rates is a global phenomenon and such rates continue to surprise to the downside.
Shrinking Europe
Europe’s population is already shrinking, despite sizeable net immigration (a factor expected to keep the US population growing).
Growth link
Historical data suggests that high population growth is associated with strong economic growth.
This is the next in a series of papers over the summer about long-term issues. The topic this week is demographics and the likely effect on economic outcomes. Later papers will consider the implications for savings, asset performance and climate change.
But first, a few comments about the developments of the last week. Central bank meetings came thick and fast but, as expected, there were no policy changes at the Bank of Japan, Bank of Canada or at the Fed. Two Fed committee members voted for a rate cut but that didn’t boost market faith in a September rate cut.
What did swing market opinion was Friday’s employment report, with non-farm payrolls increasing by only 73k in July (versus a Bloomberg consensus of 104k). Even worse, the June data (which had reassured markets when released) was revised down to a gain of 14k (from the original 147k), while May was revised down to 19K (from 144k). The US labour market appears weaker than originally thought, with an average monthly gain of 35k in the three months to July versus 127k in the three months to April and 209k in the last three months of 2024. If that weren’t enough, the Household Survey (used to calculate unemployment) suggests the average monthly change in employment in the last three months is -288k.
