Demographics

Strong Income Growth about to Occur Thanks to Baby Boomer Retirement

Chris_Porter_web

Chris Porter

June 11, 2014

The US labor pool will grow 75% more slowly than usual over the next decade due to heavy retirement. This will:

  • Bring unemployment down quickly, even if we attract more people back to the labor force
 
  • Create wage inflation as employers finally have to compete for talent
 

For years, the US has been adding 1.8+/- million eligible people to the labor pool:

  • 4.3 million+/- people have been turning 20 every year
 
  • 2.5 million+/- people have been turning 65
 

In 2012, the labor pool growth got cut in half, to 0.9 million, as 4.5 million people turned 20, and the number of people turning 65 skyrocketed to 3.6 million. Looking forward, the labor pool growth will steadily decline to a paltry 0.2 million in 2022, where it will stay flat for several years. This forecast uses the “middle immigration series” forecasted by the Census Bureau. Robust immigration would change the numbers but not the conclusion. We also tested pushing out retirement a few years, and all it does is delay the inevitable. The underemployed and those who dropped out of the labor force will find it much easier to return to work.

This is mostly great news for housing demand:

  • Household formations will be strong, driving apartment demand and eventually home buying.
 
  • Household incomes will finally start growing, allowing for rent increases.
 
  • The surging demand for retirement housing will need to be met.
 

Not all is rosy, as this also means that the economy will continue to grow slowly, at best, and that the cost to build homes will likely rise. Overall, we expect the positive to significantly outweigh the negative, especially if you focus on the demographic opportunities.

Building Market Intelligence™

Every week, we deliver analysis to over 40,000 subscribers with our Building Market Intelligence™ newsletter. Subscribe to our weekly BMI newsletters to stay current on pressing topics in the housing industry.

About The Author

Chris Porter
Senior Vice President, Chief Demographer
Chris brings clarity to JBREC’s clients on demographic trends and translates their impact on local housing markets. He also analyzes and compares local housing market metrics in JBREC’s Metro Analysis and Forecast and Regional Analysis and Forecast monthly reports.

Contact Us

If you have any questions about our services or if you would like to speak to one of our experts about we can help your business, please contact Client Relations at clientservices@jbrec.com.

Products and Services Mentioned

Research Membership

Our research services enable our clients to gauge housing market conditions and better align their business and strategic investments in the housing industry. We provide a thoughtful and unique holistic approach of both quantitative and qualitative analysis to help clients make informed housing investment decisions.

Metro and Regional Housing Package

An overview of major housing and economic trends, as well as forecasts across 100 MSAs nationwide. The information in this subscription package provides a complete picture of housing supply, demand, and affordability through local insight, proprietary surveys, and extensive data analysis.

Real Estate Consulting

Our experienced team of consultants helps clients make sound housing investment decisions. We thrive on their success and work with many clients over multiple years and numerous projects.

Latest Insights

4 Ways Middle Schoolers Want to Expand Affordable Housing
What Custom Home Architects Want Window Manufacturers to Know
JBREC-Podcast-Banner-86
Value Adding—How Resale Will Survive a Changing Market