Where Have All The Young Folks Gone?
May. 12, 1992
NEW YORK (AP) _ Where have all the young folks gone?
The question puzzles many people, a few demographers included, and it is becoming of special concern to economists. With fewer people marrying and having children, they aren't buying a range of consumer items from cups and saucers to houses and toys.
Moreover, the downturn isn't limited to the United States but can be found in many other industrialized nations as well.
Gert von der Linde and Richard Hokenson, economist and demographer respectively at Donaldson, Lufkin & Jenrette, predict that in the 1990s, the 20-29 age group will fall by 17 million just in North America and Western Europe.
Such a decline is certain to deflate the sales potential of many goods and services. And it could mean less borrowing and more saving.
In some respects, the impact can be good. Americans in the 1980s overloaded on credit and left savings somewhat undernourished, leading to an inflow of foreign lending and fears that Americans were selling their country.
But right now, the important thing in the minds of many economists is to get the economy moving again, and that means consumer spending must improve. With relatively fewer young people to do the spending, that job is impeded.
While the relationship has not been established with certainty, the aging of the population may have much to do with the change in spending patterns that has been observed in the past couple of years.
Rather than taking on more debt as the cost of borrowing falls, for example, consumers have been avoiding new commitments and instead have been using the opportunity to pay down existing debts.
During March, for instance, consumer installment credit oustanding fell at a 2.7 percent annual rate, resulting in a decline of $1.61 billion. For the months of February and March the decline exceeded $2 billion.
A strong consumer sector is widely viewed as necessary for the economy to stage a sustained advance, since it accounts for about two-thirds of economic activity. New customers are the prime source of market growth.
As consumers age, they spend less. Having accumulated assets, they no longer have the pressing need or desire for more. Their energies turn toward conserving and protecting what they have.
The biggest population gains between now and the year 2000 are destined to be among those age 40 to 59 years, and the impact of this trend already may be hurting retail sales in general and automobile sales in particular.
It could account for at least some of the indecisiveness of housing markets and it could explain in part the prolonged and widespread consumer caution. It could be still another factor in a weak rather than robust recovery.
End Adv PMs Tuesday, May 12