It is often said that societal aging is a terrible thing for the economy — because it means that fewer people be working and therefore not contributing to economic growth. Worse, more people will be collecting pensions and demanding health care.

The argument goes like this: Aging will weaken many countries’ economies due to what economists call the old-age dependency ratio (OADR). That’s the proportion of the population over 64, relative to the working-age population (those aged 15 to 64). If one assumes that old people are unproductive consumers of government benefits, then a rising OADR implies slower economic growth which then creates increasing pressure on public expenditures. Well, that may have been a sound argument but now it seems to becoming less sound than it once was.

Andrew Scott is Professor of Economics at the London Business School and he has written an interesting piece for the website of the World Economic Forum, in it he says:

“The average age of the US population has steadily increased since 1950, but the average mortality rate has trended down. In other words, the average US citizen has become chronologically older but biologically younger. She is further along in years from her date of birth, but also further away from her probable expiration date. And the same trends can be found in other advanced economies, including the United Kingdom, Sweden, France, and Germany.

Given the decline in average mortality, one cannot say unambiguously that these societies have aged. Average mortality rates are driven by two factors, only one of which could properly be called “aging.” As countries industrialize, they undergo a “demographic transition” from higher to lower birth rates. This shift implies that older cohorts of the population will increase in size, and that average overall mortality will rise, because mortality rates are higher for older people.

But over the past few decades, this aging effect has been offset by a “longevity effect”. Owing to medical advances and other factors (for example, lower rates of smoking), mortality rates at all ages have fallen. In actuarial terms, this means that people are younger for longer. Whereas the aging effect captures changes in the age distribution, the longevity effect addresses how we are aging. And in a country like the US, where the average age has increased while average mortality rates have fallen, it is clear that the longevity effect has more than offset the aging effect.”

Another study has some additional encouraging news. Joshua Hartshorne and Laura Germine of the Boston College Department of Psychology and the Laboratory for Brain and Cognitive Health Technology at McLean Hospital, respectively report that brain functions peak at different ages. While some abilities start to decline around high school graduation but other abilities remain at good to peak levels until people reach their 70s (basically the life span). Young people process new information fast, with peak ages around 19; short-term memory improves until about age 25; and vocabulary peaks in the late 60s and early 70s.

Lastly, Chris Farrel busts some myths about older Americans in a column at ( ) One of the more important ones, I think, is this:

“Older adults can’t wait to retire: Boomers are better educated than previous generations. They’re living longer and they’re healthier, on average. Jobs are less physically demanding in an economy dominated by services. The notion of abandoning skills and knowledge accumulated over a career is less attractive with increased longevity.”

Farrel also notes that there are less abstract aspects to consider:

“The personal finances of delaying retirement are compelling. A paycheck makes it practical to delay filing for Social Security benefits, which is more generous at age 70 than at age 62. The incentives to work longer have increased with the decline in pensions and the rise of 401(k)s.”

Ron’s Market Minute 4/5/2019 — Sampling Errors

Regular readers of this newsletter will perhaps recall that last month the markets were stunned – in a not good way – with the news that the Bureau of Labor Statistics Non-Farm Payrolls report for February showed a shockingly low 20,000 new jobs added. That was well below the 160K expected. At the time our response was ‘Hold on: This may be too goofy to be real.” After all, all reports that are generated through measuring a sample of the thing under study are, and always will be, subject to errors in the sample, which is why we caution ‘Don’t believe a number ’til you see it twice’.

Well, sure enough — and we are quite happy to report this — today’s BLS Non-Farm Payrolls number for March proves out that the Feb data was a statistical anomaly. According to the report released this morning the number of Non-Farm jobs added in March was 196,000 which is a good bit higher than the 170K anticipated.

Also adding to the good news data points is this as noted at

“The Department of Labor’s weekly jobless claims continued to surprise this week as seasonally adjusted initial jobless claims fell to 202K from a revised 212K last week. This comes in complete contrast of what briefly appeared to be a bottoming out of claims earlier this year, as that increase has now been more than erased. Not only is this print of 202K the 213th week below 300K, but it is also a low for the current cycle. Even more impressive, it is the lowest weekly claims number in nearly 50 years!”

As pleasing to see as these numbers are, we still wish to provide a note of caution. The road ahead still holds some bumpiness, most important being the ongoing discussions with China on tariffs and trade. On the other hand, it was good to see that German manufacturing seems to have consolidated something of a turn-around. The doom-peddlers will be disappointed.

It’s hard to be too much of a pessimist right now. Can you tell?

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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