2015 has proven to be an incredibly busy and exciting year so far. We’ve had constant surprises from Greece, the Eurozone, and China, among other places; the Fed has continued to keep everyone guessing by suggesting rate hikes but refusing to pull the trigger; and our city and statewide housing markets have consistently defied rationality, particularly in Denver. With so much to discuss this year, I have forgotten to return to the single-most important topic of all: demographics. This week’s show is first in a two-part series exploring the fundamentals of demographics and how they affect economic conditions both in America and globally.
Demographics is the study of populations and the subgroups composing a given population. Typically, my show considers the population of the United States and breaks its population into age-based subgroups commonly known as generations. Occasionally we will consider demographics on an international scale to see what effects one country’s demographic composition may have on other nations individually and the world economy as a whole. When we discuss the United States and its generations, we generally divide the population into:
- The Greatest Generation – Those born between 1900 and 1925, who lived through the Great Depression and fought in World War II;
- The Silent Generation – Those born between 1926 and 1940;
- The Baby Boomers – Those born between 1941-1962 as the children of The Greatest Generation.
- Generation X – Those born between 1963 and 1982;
- Millennials – Those born between 1983-2000;
- Generation Z – Those born after the turn of the millennium.
Of these generations, we spend most of our time discussing the Baby Boomers, Generation X, and the Millennials. We do this because each of these generations is markedly different from the generation preceding it, and these differences have had tremendous effects on our economy. The Baby Boomers are responsible for the extraordinary economic growth that occurred between the 1980’s through 2006, and the economic lull that has ensued since then can be attributed to Generation X, which was substantially smaller than the Baby Boomer generation. As the Baby Boomers retire, they are less economically productive and shift their spending habits in ways that are less conducive to robust economic growth. Generation X, because of its relatively small size, has been unable to pick up the slack to keep the economy growing at the same rate it enjoyed for the previous two decades.
The Millennials, however, are not only more numerous than Generation X but even vastly outnumbers than the Baby Boomers. They are also beginning to entire the peak productive years of their careers, which occurs around age 40. This is when a person is no longer studying or building their career skills and is able to devote all their efforts and energy to maximizing their personal productivity. As more Millennials enter their 40s, they will finally be able to replace the lost levels of productivity that Generation X was unable to cover when they entered their peak productive years.
These few paragraphs only scratch the surface of all there is to know about demographics. Next week we’ll continued with this subject by exploring what demographic changes mean for a nation and its economy. We’ll also use our knowledge of demographic trends to make predictions about what the economy will look like in ten, twenty, or thirty years, and explore ways to reshape our present financial and personal situations to take advantage of the unique opportunities these demographic changes will afford.