Long-Term U.S. Economic Growth Faces Demographics Challenge
September 30, 2020
While much of the focus is on the short-term economic recovery from the coronavirus, a new report outlines some of the long-term challenges facing the economy, and they have nothing to do with the pandemic. The Congressional Budget Office released its latest long-term outlook forecasting just 1.6% annual economic growth over the next three decades. A Wall Street Journal analysis of the report notes that the U.S. hasn’t had a growth trend that low since the 1930s.
The CBO projects that fertility rates will drop to 1.6 children per woman next year, far short of the 2.1 that each generation needs to replace itself. This means that there will be fewer people entering the workforce in the coming years. The CBO now predicts that the population will grow to 374 million in 2046, 34 million fewer than the CBO predicted in 2012.
It should be noted that such forecasts are essentially educated guesses based on assumptions that are will turn out to be wrong. However, the report is still useful in identifying trends and highlighting potential headwinds that may face the economy.