48
June(‘ Ageing populations create paradigm shift for growth’, June 2016):
The average ratio of US house prices to earnings of 9.0x disguises a wide variation: Whites are close to the average at 8.7x, while Asians are below it at 7.4 But the younger Black and Hispanic populations, which are critical for driving first- time home buyer sales, have ratios of 11.6x for Blacks and 12.0x for Hispanics, based on US Census Bureau data for new home prices. Unsurprisingly, National Association of Realtors data shows the share of first-time buyers is at its lowest level since 1987 at just 32 % and has been falling for 3 years. A second key issue is the change that
%
95
85
75
65
55
45
35
25
1948
US LABOR FORCE PARTICIPATION RATE % WEALTH CREATORS 25 – 54; NEW OLD 55 +, 1948 – 2016
WEALTH CREATORS 25 – 54 NEW OLD 55 +
Source: pH report analysis: US Bureau of Labor statistics
1953 1958
1963 has taken place in the labour market itself, as shown in chart 11. It was boosted in the post-War period by the rising number of Boomers entering the job market and joining the Wealth Creator 25 – 54 generation— who are critical to consumption growth. But their participation rate peaked in 2000 at 84.1 %, as the oldest Boomer reached the age of 54. It has since declined to 81 % – equal to 1984’ s level, when younger Boomers were still joining the Wealth Creator generation. This decline was partly compensated by the rise in participation by the growing number of New Olders, whose rate has risen back to the 40 % level that was
1968 1973
1978 1983
1988 1993
PEAK RATE 84.1 % in 2000 TODAY’ S RATE 81 % = 1984 LEVEL
TODAY’ S RATE 40 % = PRE-1965 ERA
1998 2003
2008
Quality of life and sustainability
2013
▲ Chart 11 Labour force participation rates have declined in the Wealth Creator cohort and plateaued amongst New Olders are becoming ever-more important when discussing infrastructure needs
If you don’ t know where you’ re going, any road will do
common in the post- War period. But this growth has now plateaued, even though life expectancy has increased by a decade over the period, highlighting the urgent need for discussion of new policies that enable people to retrain for new roles in their 50s and 60s.
One further point is also relevant here, as an example of the opportunities that could be developed under President Trump’ s proposals for a $ 1tn fund to fund infrastructure development over the next 10 years.
It is of course likely that most or all of this money will be spent on traditional projects concerned with building basic structures and promoting economic growth. But as chart 12 from Oxford Analytics( on behalf of PwC) shows,“ Infrastructure spending evolves with a region’ s economic growth”. A major, and so far largely unrecognised need, is for spending to be directed at areas relevant to today’ s rapidly ageing population. This does not just mean healthcare facilities or sheltered housing, but it also implies a recognition that“ quality of life” and sustainable living are becoming ever-more important.
Companies and investors could usefully take a lead here, and profit accordingly.
Concerns are mounting over China’ s lending levels, after total social financing rose again last year, reversing the 2013 – 2015 trend, as chart 13 shows. As the IMF warned:
“ China urgently needs to tackle its corporate-debt problem before it becomes a major drag on growth”
The position is not helped by the rising value of the US dollar, given that its foreign