THE BABY BOOM CHART BOOK 1997

Transcription

1 Deutsche Morgan Grenfell US Equity Research Portfolio Strategy Service # The Economic Consequences Of The Peace #3 Conference Call With Alan Blinder #37 New Era Recession? #3 Fed s Stock Market Model Finds Overvaluation Topical Study #39 THE BABY BOOM CHART BOOK 1997 November 11, 1997 Dr. Edward Yardeni Amalia Quintana Web Site: yardeni@ix.netcom.com

2 #1 In, the Baby Boomers will be 3-5 years old. LIVE BIRTHS* (millions) 9 Baby Boom 7 million (33-51) Baby Bust 1 million (1-3) Baby Boomlet million (-) "Grandparents" million (73-7) "Parents" 55 million (5-7) * Figures in parentheses are the youngest and oldest ages of group members during Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

3 - The Age Wave - 5 # AGE COMPOSITION OF LABOR FORCE* (percent) 19 5 Q Year Olds Year Olds 19 Q * Oldest and youngest Baby Boomers turned 1 in 19 and 19, respectively. #3 THE AGE WAVE 5 In 19, the Baby Boomers all turned 1 years or older. Maturity will increase through 1. The labor force is the most mature since the mid-19s. 5 Age Composition of Labor Force: 1-3 Year Olds (percent) Age Composition of Adult Population: -3 Year Olds* (percent) * Projected data start in 199. Adult population is years and older, and includes armed forces overseas. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 3

4 - The Age Wave - Stock prices have risen faster than consumption and home prices as the Baby Boomers have aged. But the best gains may be over for stocks for a while # THE AGE WAVE & STOCK PRICES * Percent of labor force - years old. #5 THE AGE WAVE & ASSET PRICES Age Wave* Ratio of S&P 5 Stock Index to Personal Consumption Expenditures Age Wave* Ratio of S&P 5 Stock Index to Average Existing Home Prices * Percent of labor force - years old. 1 Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

5 - The Age Wave - 55 # THE AGE WAVE & INFLATION Age Wave* Inflation Trend** * Percent of labor force 1-3 years old. ** Five-year moving average of yearly percent change in CPI. #7 THE AGE WAVE & BOND YIELD Age Wave is a big influence on inflation trend and suggests inflation will remain subdued at least through end of the century. The Baby Boomers will be 3-5 years old by the year. That s bullish for bonds. We expect the government bond yield to fall to % in. 9 7 Age Wave* 5 3 Ten-Year Government Bond Yield** * Percent of labor force 1-3 years old. ** Five-year moving average of ten-year government bond yield. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 5

6 - Population: Numbers - # US POPULATION BY AGE (millions) & Over Source: Bureau of the Census, U.S. Department of Commerce Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

7 - Population: Numbers -.5 #9 US POPULATION BY AGE (annual change, millions) & Over Source: Bureau of the Census, U.S. Department of Commerce Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 7

8 - Population: Numbers #1 US POPULATION BY AGE (yearly percent change) & Over Source: Bureau of the Census, U.S. Department of Commerce Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

9 - Population: Numbers #11 POPULATION (yearly percent change in 1-month avg) Total Population* Civilian Noninstitutional Working-Age Population** * Population used to calculate per capita income. Includes military in US. Source: Census Bureau. ** Source: US Department of Labor, Bureau of Economic Analysis The working-age population grew much faster than the total population during the late 19s and 197s as the Baby Boomers flooded into the labor markets. The growth rate has been at record lows through most of the 199s.. #1 HOUSEHOLD FORMATION (millions) year moving average The Baby Boomers are no longer young adults. As a result, household formation has declined sharply from 1. million per year, on average, during the 19s to 1. million per year from 199 to Source: US Department of Commerce, Bureau of the Census, Series P-. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 9

10 - Population: Characteristics - Since the mid-19s there has been a significant downtrend in the average number of people in both family and household living units. However, both have flattened in recent years. Households are smaller than families, on average, because there are many single-person households: People are marrying later, getting divorced, and living longer #13 3. AVERAGE POPULATION Per Family Per Household Source: Current Population Reports 1 #1 NONFAMILY HOUSEHOLDS BY AGE OF HEAD (as a percent of total households) 1 In 199, 3% of all households were not families, up from 1% in 197. One-third of the nonfamily households are senior citizens Source: US Department of Commerce, Bureau of the Census, Series P-. Page 1 / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

11 - Population: Characteristics - # MEDIAN AGE AT FIRST MARRIAGE Men Women People are getting married for the first time at a later age. The medium age for men is up to 7 from about 3 twenty years ago. Women are waiting until their mid-twenties to marry. During the 195s and 19s, they tended to marry in their early twenties Source: Current Population Reports #1 MARRIAGE & DIVORCE (rate per 1 population) 1 Marriages 9 1 The marriage rate has been moving lower in recent years, while the divorce rate has been relatively steady. 5 Divorces Source: US National Center for Health Statistics, Vital Statistics of the United States. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 11

12 - Population: Characteristics - The medium age of the population is, up from 9 twenty years ago, and it will continue to rise over the rest of the decade because the Baby Boomers are aging and senior citizens are living longer. Life expectancy is up over 7 years compared to about 7 years during the late 19s #17 POPULATION: MEDIAN AGE IN YEARS* LIFE EXPECTANCY AT BIRTH** (years) * Source: US Bureau of the Census, Population Division, release PPL-57, United States Population Estimates by Age, Sex, Race and Hispanic Origin. ** Source: US National Center for Health Statistics, Vital Statistics of the United States. Older people tend to move less than younger ones. 5 3 #1 MOBILITY STATUS BY AGE GROUP, (percent movers) & Over Source: Bureau of the Census, Geographical Mobility: March 199 to March 1993, Current Population Reports, Series P-. Page 1 / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

13 - Income & Spending #19 REAL PERSONAL INCOME & CONSUMPTION PER CAPITA VS PRODUCTIVITY Real Personal Income Per Capita (199 dollars, 1-month sum) Nonfarm Productivity (1977=1) Real Consumption Per Capita (199 dollars, 1-month sum) Q Per capita real personal income and consumption are at record highs. Productivity is the main determinant of these three measures of the standard of living and it is also at a record # INCOME PER CAPITA (thousands of dollars) Personal Income Per Capita (199 dollars, 1-month sum) Adjusted Mean Household Income Per Capita* (199 dollars) Both median and mean family household income data show virtually no growth over the past 5 years. Both measures need to be divided by the average size of the household unit, which has been falling. Adjusted this way, mean household income per capita has been growing in line with personal income per capita! * Mean income of households divided by average population per household. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 13

14 - Income & Spending - 1 #1 REAL PERSONAL INCOME (yearly percent change in 1-month avg) 1 5.3% 3.%.7%.% Real personal income growth was on a downtrend over the past three decades as growth in productivity stagnated. This long-term trend is already getting reversed in the current decade * Dashed lines show decades annual averages. #.5 REAL PER CAPITA PERSONAL INCOME. (yearly percent change in 1-month avg) % % 1.%. 1.% * Dashed lines show decades annual averages. Page 1 / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

15 - Income & Spending - #3 REAL CONSUMPTION EXPENDITURES (yearly percent change in 1-month avg).9% 3.% 3.%.1% * Dashed lines show decades annual averages. # REAL CONSUMPTION PER CAPITA (yearly percent change in 1-month avg) Consumer spending growth has been on a downtrend for quite some time because income growth has been on a downtrend. Income growth is improving. Consumption growth should follow unless Baby Boomers decide to save more. 3.%.5%.% 1.1% * Dashed lines show decades annual averages. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page

16 - Income & Spending #5 REAL CONSUMPTION PER CAPITA (199 dollars, saar) Rent & Utilities* Food Medical Care On a per capita basis, the fastest growing categories of real consumption are medical care and recreation. The other major categories are showing relatively little growth per capita * Rent includes owner- and tenant-occupied rent. Utilities include electricity, gas, water and other sanitary services, fuel oil and coal. # REAL CONSUMPTION PER CAPITA (199 dollars, saar) Transportation Personal Business* Recreation 1 1 Clothing & Shoes * Includes brokerage charges and investment counseling, bank service charges, services furnished without payment by financial intermediaries except life insurance carriers and private noninsured pension plans, expense of handling life insurance legal services, funeral and burial expenses and other. Page 1 / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

17 - Income & Spending #7 REAL CONSUMPTION BY CATEGORY (as a percent of total real consumption) Rent & Utilities* Food Medical Care * Rent includes owner- and tenant-occupied rent. Utilities include electricity, gas, water and other sanitary services, fuel oil and coal. # REAL CONSUMPTION BY CATEGORY (as a percent of total real consumption) Transportation For the first time ever, consumers are spending more of their budgets on medical care than on food. The proportion of total consumption spent on food has been declining for a long time, as consumers spend relatively more on medical care and recreation Personal Business* Recreation Clothing & Shoes * Includes brokerage charges and investment counseling, bank service charges, services furnished without payment by financial intermediaries except life insurance carriers and private noninsured pension plans, expense of handling life insurance legal services, funeral and burial expenses and other. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 17

18 - Income & Spending - Older workers tend to earn more than younger ones, presumably because they are more experienced, productive, and committed to their jobs. By the year, the Baby Boomers will be 3-5 years old. So there will be more households earning more money than ever before #9 MEAN INCOME OF HOUSEHOLDS BY AGE OF HEAD (thousands of 199 dollars) All* * Includes - year olds. Source: Bureau of the Census, Income Statistics Branch, unpublished data. #3 NUMBER OF HOUSEHOLDS BY AGE OF HEAD (millions) 9 During the 19s, all household age groups shown here increased in numbers except the 55- group. During the 199s, only the - and 5-5 year olds are growing Source: Bureau of the Census, Income Statistics Branch, unpublished data. 1 Page 1 / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

19 - Income & Spending #31 AGGREGATE MONEY INCOME BY AGE OF HOUSEHOLD* (billions of 199 dollars) During the 199s, the only age groups showing significant gains in total group money income are people - and * Mean income times number of households #3 AGGREGATE MONEY INCOME BY AGE OF HOUSEHOLD* (as a percent of total money income) By the year, -5 year olds will probably account for 5% of personal income, up from over 53% currently * Mean income in 199 dollars times number of households. 1 Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 19

20 - Personal Savings #33 PERSONAL SAVINGS RATE (1-month avg, percent) So far the aging of the Baby Boomers hasn t boosted the personal savings rate. Instead, it is still falling #3 PERSONAL SAVINGS VS CONSUMER INSTALLMENT BORROWING (1-month sum, billion dollars) 3 5 Borrowing pace is in cyclical decline. Personal savings still below peak of early 199s. Personal Savings Personal Borrowing Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

21 - Personal Savings - # PERSONAL SAVING AND ITS COMPONENTS (billion dollars) Personal Saving Impersonal Components Truly Personal Components #3 "IMPERSONAL" COMPONENTS OF PERSONAL INCOME (billion dollars) Imputed Interest Received From Private Noninsured Pension Plans And From Life Insurance Carriers Personal savings includes two big "impersonal" sources of income which are not taxed and can only be saved. They exceed $3 billion and currently exceed total personal savings. Indeed, excluding these two, "truly" personal savings has been mostly negative since Employer Contributions To Private Pension Funds Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 1

22 - Labor Force - 75 #37 CIVILIAN LABOR FORCE (as a percent of total labor force) 75 Males now account for less than 55% of the labor force, down from 7% in the early 195s. Females account for %, up from 9% in the early 195s Male Female #3 CIVILIAN LABOR FORCE PARTICIPATION RATE* (percent) 7 5 The labor force participation rate is hovering around 7%. Since the 195s, the decline in the male component of the labor force participation rate has been more than offset by females Total Male Component* Female Component* * Labor force divided by noninstitutional working-age population. Male and female components are persons that are 1 years and older. Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

23 - Labor Force #39 FEMALE CIVILIAN LABOR FORCE PARTICIPATION RATE BY AGE* (percent) A record 55% of all women who are years or older are in the labor force. The labor force participation rate of younger women has stabilized around 7% in recent years. & Over * Female labor force divided by female noninstitutional working-age population. 95 # MALE CIVILIAN LABOR FORCE PARTICIPATION RATE BY AGE* (percent) The percent of older males participating in the labor force is hovering around 7%, while the younger ones participation rate is heading toward % & Over * Male labor force divided by male noninstitutional working-age population. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 3

24 - Unemployment - 1 #1 CIVILIAN UNEMPLOYMENT RATE (percent) The unemployment rate shifted upward during the 197s and early 19s relative to inflation because there was a hugh influx of young workers who tend to have higher unemployment rates than older ones. Since the early 19s, the unemployment rate has been shifting back down. Currently, it is at a -year low # TOTAL UNEMPLOYED BY AGE (as a percent of total labor force) 5-5 Q3 Q Q & Over 1 Q Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

25 - Unemployment - 75 #3 LABOR FORCE: MEN 55 YEARS & OVER (as a percent of male civilian noninstitutional population 55 years & older) There was a dramatic long-term downward trend in the labor force participation rate of older men since the late 19s until flattening out in the 199s # UNEMPLOYMENT RATES BY SEX ( percent) During the 195s, 19s, and 197s, the female unemployment rate usually exceeded the male rate. Since the 19s, the two rates have been nearly identical. Both are down to about.5%. Males Females Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 5

26 - Health Care #5 MEDICAL CARE SPENDING (billion dollars) Total Medical Care Consumption Medicare Plus Medicaid Spending on health care will continue to rise rapidly as Baby Boomers age. 1 7 Medicare # MEDICARE/TOTAL POPULATION 5 YEARS & OLDER* (dollars) * Projections begin in 199. Page / November 11, 1997 / Deutsche Morgan Grenfell Topical Study #39

27 - Social Security #7 SOCIAL SECURITY SURPLUS (billion dollars) Dashed line is Congressional Budget Office s baseline projection. Social security will remain in surplus for the next years. Big deficits will start when the Baby Boomers start to retire after 1. 5 # FEDERAL OUTLAYS (billion dollars) F Social security and health care outlays will rise rapidly as the Baby Boomers age. Social Security 1 1 Medicare+Medicaid F = Forecast line. Source: Congressional Budget Office. Deutsche Morgan Grenfell Topical Study #39 / November 11, 1997 / Page 7

28 TOPICAL STUDIES Topical Studies #19 and higher are available on #3 Dr. Edward Yardeni, Fed s Stock Market Model Finds Overvaluation, August 5, 1997 #37 Dr. Edward Yardeni, New Era Recession? Deflation, Irrational Exuberance, & YK, July 1, 1997 #3 Dr. Edward Yardeni, Conference Call With Alan Blinder, June, 1997 # Dr. Edward Yardeni, The Economic Consequences Of The Peace, May 7, 1997 #3 Dr. Edward Yardeni, Populist Capitalism And Other Wildly Bullish Themes, February 5, 1997 #33 Dr. Edward Yardeni, Productivity Must Be Booming, January, 1997 #3 Dr. Edward Yardeni, The Undefeated Forces Of Deflation, ober, 199 #31 Dr. Edward Yardeni, Economic Consequences Of The Internet, ober, 199 #3 Dr. Edward Yardeni, Backlash: Workers Vs. Bonds, May, 199 #9 Dr. Edward Yardeni with Amalia Quintana, The Baby Boom Chart Book 199, March, 199 # Dr. Edward Yardeni, Liquidity Story Is Wildly Bullish, February 1, 199 #7 Dr. Edward Yardeni, 1, In, November, 1995 # Dr. Edward Yardeni, The US Economy s Mega-Trends, July 1, 1995 #5 Dr. Edward Yardeni, The High-Tech Revolution In The US March, 1995 # Dr. Edward Yardeni, Hard Or Soft Landing?, February, 1995 #3 Dr. Edward Yardeni, The End Of The Cold War Is Bullish, tember 1, 1993 # Dr. Edward Yardeni, Apocalypse Now! (NOT!), May, 199 #1 Dr. Edward Yardeni with Amalia Quintana, The Baby Boom Chart Book 1991, ober 9, 1991 # Dr. Edward Yardeni, The Collapse Of Communism Is Bullish, tember, 1991 #19 Dr. Edward Yardeni and David Moss, The Triumph Of Adam Smith, July 17, 199 #1 Dr. Edward Yardeni and Deborah Johnson, Dow 5, May 9, 199 #17 Dr. Edward Yardeni, The Triumph Of Capitalism, August 1, 199 #1 Dr. Edward Yardeni with Amalia Quintana, The Baby Boom Chart Book, January 5, 199 # Dr. Edward Yardeni and David Moss, The New Wave Manifesto, ober 5, 19 #1 Dr. Edward Yardeni, Could Real Estate Prices Fall? And What If They Do?, August, 19 #13 Dr. Edward Yardeni, The Coming Shortage Of Bonds, June, 19 #1 Dr. Edward Yardeni, How The Baby Boomers Are Changing The Economy, April, 19 #11 Dr. Edward Yardeni and Deborah Johnson, The Restructuring Of Corporate America Is Bullish, December 9, 197

29 Copyright (C) Deutsche Morgan Grenfell Inc All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions expressed are subject to change without notice. Deutsche Morgan Grenfell Inc. and its affiliated companies and/or individuals may, from time to time, own, have positions in, or options on the securities discussed herein and may also perform financial advisory services, and/or have lending or other credit relationships with those companies. This material has been approved for distribution in the United Kingdom, to professional investors who fall within the exemptions contained within the UK Financial Services Act 19 - Investment Advertisement Exemptions Order 19, by Deutsche Bank AG London, Bishopsgate, London ECP AT. Member of the LSE and regulated by SFA, Tel: (171) 55-9, Fax: (171) Orders placed by UK persons directly with Deutsche Morgan Grenfell Inc. will not be governed by all investor protection provisions of the UK Financial Services Act 19. Additional Information Available on Request.