Demography and the economy

Date posted: March 20, 2014

N.C. State University economist Mike Walden and his colleagues are always searching for factors that can help predict various economic conditions such as growth, spending and inflation. Host Mary Walden says this can be complicated, but one element stands above all others in its predictive power. What is it?

Mike Walden: “Well the answer’s simple.  It’s people, and it’s the number of people in an economy, how they’re changing and their age. In fact, there was an economist named Simon Kuznets, who pioneered this kind of research decades ago. And people who’ve followed him have supported the idea that there is a predictable pattern that we see in the economy based on how many people there are, how the population is growing and the ages of people.

“Predictable patterns include things like what people spend their money on, where they’ve moved to, what kinds of jobs are created, what inflation rate is, what the rate of economic growth is, etc. It all goes back to, very simply, people.

And so, if you use this approach, what it’s telling us right now, given that we have had a slowdown in population growth over the last generation, is that we may be looking at a permanently slower growing economy for several years in the future. But an upside is a very, very low inflation rate. It’s going to be very interesting to see if these predictions are born out.”

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