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The U.S. economy has slowed to some extent, with relatively modest job growth (particularly in the private sector) and other signs of a less active period. The current situation is the inevitable result of the Federal Reserve’s efforts to control inflation and uncertainties such as increasing geopolitical tensions and the prospect of policy changes in the new administration.
But when projected over decades, long-term patterns such as demographics, fiscal sustainability, and innovation have far more influence than the headlines of the day. Let’s look at some important points for context.
The latest long-term projections show that U.S. population growth will slow, with net immigration accounting for all growth as early as 2040. The population of people in their prime working age (25-54) is expected to remain fairly stable, while the population of people 65 and older is expected to expand rapidly. In addition to the impact on the workforce (and the need for simple, sensible immigration), the large federal budget will have major impacts on items like Medicare and Social Security. The better we respond to these unavoidable demographic realities, the greater the potential success we can achieve.
While the federal debt situation is not catastrophic, it cannot be ignored indefinitely. Interest payments are a large and rapidly growing component of your budget. Debt also causes “crowding out,” where investors buy government bonds rather than invest in more productive, expansion-oriented ways. If current patterns continue, our potential for future prosperity will be limited.
Medicare and Social Security are two of the largest categories of spending, and both are increasing due to an aging population and inflation. Others include national defense and net profits, which may inevitably increase as a result of geopolitical tensions. It will be difficult to slow the growth of debt, much less reduce it. A bipartisan, long-term approach is the only viable and sustainable approach.
Innovation has long been (and will continue to be) essential to economic growth. The United States will never be able to manufacture many products at low cost due to rising labor costs and the concentration of capital and technology. Education and enlightening policies to encourage basic research and implementation will help us maintain leadership in this important field. It saves lives and drives world-changing progress, while at the same time being essential to our economy.
Our latest forecasts show that the U.S. economy remains well-positioned for long-term expansion, although there are certainly challenges ahead. We project employment to grow at a relatively healthy 1.52% per year over the next 30 years, which would translate into 89.2 million jobs by 2053 (this is a (possible only if there is a continuous presence of immigration at the level). No one knows exactly what will happen in 30 years, but the fundamental trend is clearly upward. Stay safe!
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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of more than 3,000 customers over the past 40 years.
