The graph above is sampled from a post by Bill McBride cited in my previous post. When I saw it I was immediately struck by a few things, far afield from Bill’s topic which is the relationship between demographics and the housing market. I’m going to list some of the thoughts that graph evoked in my in a nearly stream of consciousness fashion.
The first thing that occurred to me was the relationship between that graph and this one of homicides in Chicago:
right down to the “bump” in 2016.
The second thing that occurred to me was the connection between that graph and the observed decline in college enrollments.
The second thing was the lengthy almost flat part of the graph, starting for 24-year-olds in two years and echoed, naturally, by 34-year-olds ten years later, persisting for twenty years. That is unprecedented in U. S. and probably world history and has serious implications for most aspects of our society including the economy, education (particularly higher education), housing, and on and on. If the relationship is more than just a coincidence institutions of tertiary education should fasten their seatbelts—the decline is permanent, at least for the foreseeable future. And maybe the declines in homicide rates have less to do with policies and more to do with demographics.
I then wondered about that change. Could it be related to the sharply lower rate of marriage and family formation among millennials compared with previous cohorts? It’s almost certainly related to much notably smaller family sizes than in previous cohorts.
Finally, I wondered about the interrelationship of the trends shown in the graphs with immigration. As should not be surprising immigrants, particularly illegal immigrants are overwhelmingly between 20 and 40. It would seem to me that has implications not just on the veracity of the projections but on issues like expectations of rent vs. buy and willingness to pay.
The aphorism “demography is destiny” is attributed by some to the French philosopher of science Auguste Comte. Whoever said it, it might be better to consider some of these things now rather than being surprised by events later.
Pick a line of business and let your mind run wild. I come at it more from an investment perspective.
For example, is reshoring real? Is there a 10 year window of opportunity for US manufacturing? Or do we continue down the road to serfdom?
Infrastructure. I’ve been hearing about legislative infrastructure plays since 1990. Never happens, because its mostly pork. But to be more specific, if the demographic of 30-39 year olds is positive for new homes, what about the ageing out Baby Boomers? Is assisted living the sector to be in? Do you want to be in the remodeling business for those older boomers exited homes, or new home construction, and where? I’ll take FL, SC and NC for either, anytime. I wouldn’t touch IL or NJ – either.
Suppose you were in the furniture business. (Or, say, provide capital equipment to that business.) Historically high end buyers always went to the Merch Mart, or Furnitureland South. No Restoration Hardware – frauds that they are. Dropping down, some would go for national brands like Ethan Allen, or further to Ashley. Now? Young people are different. It might be IKEA. They don’t care, or choose to spend their dollars elsewhere.
And on it goes. It all starts with demographics: headwinds or tailwinds. But its not destiny. Start peeling the onion.