America’s population is growing at the slowest rate since World War II, threatening to undermine demand and investment in the economy, according to a new blog post from the St. Louis Federal Reserve.

The population increased 0.35% in the first half of 2020, based on preliminary estimates by the Census Bureau, slowing for a fifth consecutive year. In California, the largest state in the nation, growth has essentially stagnated while in many large cities it has reversed.

The data suggests the population is on track to expand much more slowly than the Census Bureau envisaged in 2017, the last time it published long-term projections. That means a smaller labor force and less demand for business equipment, housing and other capital goods, according to William Emmons, an economist at the St. Louis Fed.

The decline in investment demand may help to keep interest rates low, he wrote.
Birth and death rates along with immigration all impact population growth. U.S. births reached a peak of about 4.32 million in 2007, then declined to 3.75 million by 2019.

Some analysts predict the coronavirus recession will depress births even further, possibly by as much as half a million. In 2021, rates will likely be “shockingly low,” Philip Cohen, sociologist at the University of Maryland, said in a blog post.

The figures suggest the U.S. may be following in the footsteps of other advanced economies.

In 2006, Austrian demographer Wolfgang Lutz warned that European nations were at risk of falling into a “fertility trap” in which there are fewer women alive to have babies, leading to slower economic growth which further depressed the birthrate. At that time, American women had a fertility rate of 2.1 children—called the “replacement rate”—compared with 1.5 for the European Union. The U.S. rate has since fallen below 1.7.

Meanwhile, U.S. deaths have been on the rise as the population grows and ages, and Covid-19 accelerated the trend. Research also suggests that drug overdoses picked up during the pandemic.

International migration hasn’t been strong enough to offset rising deaths and declining births. At about a million new immigrants a year, the rate has changed little since 2005 and is projected to stay that way until 2060.

This article was provided by Bloomberg News.

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