Lawler: Updated “Demographic” Outlook Using Recent Population Estimates by Age

Aug 23 20:08 2019 Print This Article

From housing economist Tom Lawler: Updated “Demographic” Outlook Using Recent Population Estimates by AgeExecutive Summary: Analysts who use intermediate or long term population projections to forecast key economic variables such as labor force growth, household growth, etc. should recognize that the latest official Census intermediate and long term population projections (produced in 2017 and referred to as “Census 2017”) are out of date. Specifically, Census 2017 materially over-predicted births, materially under-predicted deaths (mainly for non-elderly adults), and somewhat over-predicted net international migration (NIM) for each of the last several years. In addition, the assumptions in Census 2017 projections over the next several years (and more) are almost certainly too high for births, too low for deaths, and too high for NIM. As a result, population growth, household growth, and labor force growth over the next few years will be lower than forecasts based on the Census 2017 population projections. How much lower depends critically on net international migration, which in the current environment is a big unknown.Using more realistic assumptions on births and deaths by age, I have developed updated population projections by age through 2021 assuming (1) net international migration in each year is the same as in 2018; and (2) there is no international migration in 2020 or 2021. I did the latter scenario to highlight the importance of net international migration assumptions on population projections.--------------------------------------------------------------------------------------------Earlier this year the Census Bureau released its latest (“Vintage 2018) estimates of the US resident population by single year of age for July 1, 2018, as well as for July of each of the previous 8 years. These latest estimates give analysts a new starting point that can be used to update population projections by age using assumptions about births, deaths by age, and net international migration by age. These population projections are key inputs into forecasts of other key economic variables such as the labor force and US households.While many analysts prefer to use “official” Census population projections in forecasting other key economic variables, there are several reasons why this is often not a good idea. First, official Census population projections are only released every couple of years, and may be out of date. And second, such projections may have assumptions about the key drivers of population growth that may not be viewed as “reasonable.”The latest official Census population projections were done in late 2017 and released to the public in early 2018. The “starting point” for these projections was the “Vintage 2016” population estimates, and population estimates for 2016 have since been revised. In addition, current estimates of births, deaths, and net international migration from 2016 to 2018 are significantly different from the “Census 2017” projections. And finally, the assumptions in the “Census 2017” projections for the key drivers of population changes, especially death rates by age, are not realistic or consistent with recent actual death rates by age.The latest estimate of the US resident population on July 1, 2018 was 327,167,434, which is 724,477 lower than the Census 2017 projection for that date. Fewer births, more deaths, and lower international migration all contributed to the projection shortfall. Below is a table showing the differences between the latest July 1 2018 population estimate and the July 1, 2018 forecast from the Census 2017 projection by key component.

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About Article Author

Calculated Risk

A full time blogger, Bill McBride retired as a senior executive from a small public company in the '90s. Mr. McBride holds an MBA from the University of California, Irvine, and has a background in management, finance and economics.

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