Marc Levinson

Tag: Demographics

  • Is Flight from Big Cities Propping Up Trade?

    This week brought a flurry of articles about people fleeing many big cities for places that are warmer or cheaper. Collectively, they don’t make much sense — but they may explain some of the changes in consumption patterns that have overwhelmed manufacturers’ and retailers’ value chains.

    This all started with a Census Bureau press release reporting that a number of the nation’s most populous counties lost population between April 2020 and April 2021. The New York Times followed with an article asserting that movement out of places like New York and Los Angeles led to the slowest year of population growth in U.S. history. Many newspapers and TV stations piled on, publishing similar reports about their own communities.

    On its face, the assertion that movement from some places to other places within the country should have any effect whatsoever on the national population growth rate is illogical. If there is any causality at all here, it probably runs in the reverse direction, with slow national population growth contributing to population declines in some areas.

    More perplexing is that the assertions of population decline contradict other evidence. The average home selling price in Los Angeles County rose 19% last year, according to S&P — at the same time as the county’s population fell 2%, according to Census. Washington, DC, supposedly experienced the largest percentage population decline in the country in 2021, 2.9% — but at the same time, the median selling price of homes in the District rose 10% and average rents broke records. Also, according to Census data, the percentage of housing units that are vacant across the country is the lowest in at least 23 years. Those people who are supposedly moving out of big cities aren’t leaving empty homes behind. Somebody is paying high prices for them.

    What’s going on here? What we may be seeing is that a lot of college students were living in their parents’ homes rather than in dorms as of April 2021; in that case, we can expect the numbers for 2022 to show a population boom in the same places that endured a bust in 2021. Another possibility is that an overheated economy has brought rapid growth in the number of families who own more than one home. Credible data on this point are scarce, but more people furnishing second homes could explain some of the outsized growth in spending on durable goods that has propped up merchandise trade and kept container ships full over the past two years.

    Which raises some interesting questions. With energy costs, interest rates, and service workers’ wages on the rise, owning a second home is likely to become more burdensome for family budgets. If households have to direct more of their income to maintaining a second house, will they have less available for other sorts of consumption? If mortgage rates move even higher, will second homes lose value, leading the families that own them to be more cautious about their spending? If so, the greater popularity of second homes, which has boosted trade since the start of the pandemic, may turn into a drag on trade in the months ahead.

  • Growing Slowly, Growing Old

    Recent census reports have confirmed that the populations of the world’s two largest economies are growing more slowly than previously believed. This reinforces my belief that once the pandemic-driven boom is over, merchandise trade will be anything but robust.

    On December 21, the U.S. Census Bureau announced that the U.S. population was 331.9 million in April 2021, a scant increase of 0.13 percent from April 2020. This was the lowest annual population growth rate since the country was founded, and it followed news that the 7.4 percent population increase between the 2010 and 2020 censuses was the slowest decennial growth rate since the Great Depression. Across the Pacific, China’s National Bureau of Statistics released the first results of China’s 2020 population census, reporting an average annual growth rate of 0.53 percent since 2010. This was the slowest annual growth rate since the People’s Republic took its first census in 1953. Worldwide, the Census Bureau reports, population growth fell below 1 percent in 2021 for the first time since it has estimated that statistic.

    This matters immensely to the future of globalization. As I wrote in Outside the Box, demand for the sorts of goods that move in metal containers is likely to become steadily less important in the years ahead because the world is aging.

    The median age of the global population, 23.3 years in 1985, was 31 years in 2019. According to the Central Intelligence Agency, over half the people in Japan and Germany are over age 47, and the median age in Canada, Italy, Poland, Russia, Spain, and several other countries tops 40. Thailand (39.0), the United States (38.5), and China (38.4) are not far behind. The share of Chinese residents in the 15 to 59 age group fell by a whopping 6.79 percent between 2010 and 2020, while the share of the population age 60 or over rose by almost as much.

    A high median age means that a country has a large proportion of people who are beyond their peak years of goods consumption. Their spending patterns are different from those of younger families: bigger shares of their incomes go for vacation trips, restaurant meals, medical bills, and other sorts of services, and smaller shares for stuff. Older households have had years to accumulate furniture and carpets and wardrobes full of clothing, and they are not eager to acquire more of the sorts of products turned out by manufacturers’ global value chains. This is why I assert that the next phase of globalization will have more to do with trade in services and ideas and less to do with trade in goods.

    Yes, there are countries whose populations are younger and are growing quickly, mainly in South Asia and Africa. But incomes in those regions are comparatively low, and it will be many years before the spending power of affluent young families in Pakistan and Kenya is large enough to make up for the sluggish growth in goods purchases among households in North America, Europe, and East Asia.