Are demographics going to save the US economy?

Sometimes the simplest things can have wide-ranging effects.

Business Insider's Joe Weisenthal touched upon a very interesting aspect of contemporary economics in a recent interview with Bill McBride, the economics blogger who, at his site Calculated Risk gained fame for his remarkable prescience about the global financial crisis, particularly the US housing bubble.

McBride hasn't stayed with the "doom and gloom" message, though, and has been arguing that there will be a hefty rebound in US GDP for since shortly after the economy bottomed out in 2009. His reasons for thinking that way are an interesting mixture of anecdote – normally verboten for serious economic analysts – carefully chosen statistics, and a few broader macroeconomic indicators.

For example, he argued in January 2009 that the car market (sales were plummeting at the time, and a large part of the collapse in employment and GDP) was bottoming out, and would shortly start to grow again:

So I wrote this article that says look, auto sales are near the bottom – we were at a 9 million annual rate then – I said there’s just no way – we have to be selling 12, 13, 14 million, because people need new cars every 5-7,8 years.

Similarly, the housing market couldn't stay as weak as it had been for very long, because:

After a while, there’s all this excess supply that was built, then people pulled back and lived with their parents – but people don’t want to live with their parents very long. That supply gets absorbed. When I go out into The Inland Empire I can tell you… If it’s not mostly growing, it’s getting there. Where I live, as soon as foreclosures come on the market there’s people lined up.

In other words, houses and (in most of the US) cars are necessities of life. Demand for them can fall, as people put off purchases or attempt to economise on what they do buy, but eventually, those purchases will be made. A car only lasts so long, and a growing population can only shack up in spare bedrooms for a short while.

Obviously, there is still a fair amount of analysis to perform. McBride's call on the auto industry was on the money, not just because he realised it couldn't fall forever, but also because he checked the statistics for average length of car ownership, and pre-crisis sales, and realised that the vehicle lifespan was being pushed to historically long durations.

But the methodology is reminiscent of the (apocryphal) story that some foresight of the 1929 Wall Street Crash was provided by the realisation that the bubble of the "roaring twenties" was driven by the growing adoption of a number of consumer technologies which were nearing saturation point. If economic growth over the last decade has occurred because car ownership rose from 10 to 90 per cent, it is clear that economic growth over the next decade cannot come from the same source.

The problem with these arguments is that there are a lot of specific indicators to choose from, and only some of them will have macroeconomic consequences. McBride was correct about the auto industry, but that doesn't mean that the method will work every time.

Weisenthal, following the interview, tried his hand at a similar form of analysis: proving the US naysayers wrong by looking at the nation's demographics. He writes:

When you've collapsed SO much, then really simple observations like that are germane because the demographic lift on its own to counteract the hard cyclical downturn.

And that's where the Americans should be thankful: Because there is in fact a demographic lift.

Japan is probably the economy whose struggles most resemble ours, and that force is much weaker there.

Here's a comparison of year-over-year population growth rates for Japan and the US going back to 1960. Growth in Japan (red line) has been much slower for decades.

…Japan's demographic tail wind has been non existent.

With some knowledge about demographics and the need to replace cars, you could look at a chart like this one (which divides motor vehicle sales by population) and ascertain that the lows seen in 2008/2009 were WAY out of whack with anything vaguely historical.

…The overall point is simple: A demographic lift combined with the same innovation and investment that's gone on for a long time is why the dreams of the doomsayers, who were riding so high just a few years ago, haven't come to pass.

Japan's demographic squeeze has been predicted and feared for a long time, but Weisenthal goes further by pinning a lot of hopes on America's demographic health. Is he right? Time will tell, but one thing which is worth noting is that this demographic lift isn't something which comes out of nowhere. In fact, it is something which, with the popular consensus around the need to limit immigration, is being actively fought by most US policymakers. We've written here about the unintended consequences of that limitation, but hopefully pushing the idea that demographic lift is the nation's biggest economic hope might do a little to build the coalition on the other side.

A worker builds a car in Michigan. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Want to send a positive Brexit message to Europe? Back Arsene Wenger for England manager

Boris Johnson could make a gesture of goodwill. 

It is hard not to feel some sympathy for Sam Allardyce, who coveted the England job for so many years, before losing it after playing just a single match. Yet Allardyce has only himself to blame and the Football Association were right to move quickly to end his tenure.

There are many candidates for the job. The experience of Alan Pardew and the potential of Eddie Howe make them strong contenders. The FA's reported interest in Ralf Rangner sent most of us scurrying to Google to find out who the little known Leipzig manager is. But the standout contender is Arsenal's French boss Arsene Wenger, 

Would England fans accept a foreign manager? The experience of Sven Goran-Eriksson suggests so, especially when the results are good. Nobody complained about having a Swede in charge the night that England won 5-1 in Munich, though Sven's sides never won the glittering prizes, the Swede proving perhaps too rigidly English in his commitment to the 4-4-2 formation.

Fabio Capello's brief stint was less successful. He never seemed happy in the English game, preferring to give interviews in Italian. That perhaps contributed to his abrupt departure, falling out with his FA bosses after he seemed unable to understand why allegations of racial abuse by the England captain had to be taken seriously by the governing body.

Arsene Wenger could not be more different. Almost unknown when he arrived to "Arsene Who?" headlines two decades ago, he became as much part of North London folklore as all-time great Arsenal and Spurs bosses, Herbert Chapman or Bill Nicholson, his own Invicibles once dominating the premier league without losing a game all season. There has been more frustration since the move from Highbury to the Emirates, but Wenger's track record means he ranks among the greatest managers of the last hundred years - and he could surely do a job for England.

Arsene is a European Anglophile. While the media debate whether or not the FA Cup has lost its place in our hearts, Wenger has no doubt that its magic still matters, which may be why his Arsenal sides have kept on winning it so often. Wenger manages a multinational team but England's football traditions have certainly got under his skin. The Arsenal boss has changed his mind about emulating the continental innovation of a winter break. "I would cry if you changed that", he has said, citing his love of Boxing Day football as part of the popular tradition of English football.

Obviously, the FA must make this decision on football grounds. It is an important one to get right. Fifty years of hurt still haven't stopped us dreaming, but losing to Iceland this summer while watching Wales march to the semi-finals certainly tested any lingering optimism. Wenger was as gutted as anybody. "This is my second country. I was absolutely on my knees when we lost to Iceland. I couldn't believe it" he said.

The man to turn things around must clearly be chosen on merit. But I wonder if our new Foreign Secretary Boris Johnson - albeit more of a rugger man himself - might be tempted to quietly  suggest in the corridors of footballing power that the appointment could play an unlikely role in helping to get the mood music in place which would help to secure the best Brexit deal for Britain, and for Europe too.

Johnson does have one serious bit of unfinished business from the referendum campaign: to persuade his new boss Theresa May that the commitments made to European nationals in Britain must be honoured in full.  The government should speed up its response and put that guarantee in place. 

Nor should that commitment to 3m of our neighbours and friends be made grudgingly.

So Boris should also come out and back Arsene for the England job, as a very good symbolic way to show that we will continue to celebrate the Europeans here who contribute so much to our society.

British negotiators will be watching the twists and turns of the battle for the Elysee Palace, to see whether Alain Juppe, Nicolas Sarkozy end up as President. It is a reminder that other countries face domestic pressures over the negotiations to come too. So the political negotiations will be tough - but we should make sure our social and cultural relations with Europe remain warm.

More than half of Britons voted to leave the political structures of the European Union in June. Most voters on both sides of the referendum had little love of the Brussels institutions, or indeed any understanding of what they do.

But how can we ensure that our European neighbours and friends understand and hear that this was no rejection of them - and that so many of the ways that we engage with our fellow Europeans rom family ties to foreign holidays, the European contributions to making our society that bit better - the baguettes and cappuccinos, cultural links and sporting heroes remain as much loved as ever.

We will see that this weekend when nobody in the golf clubs will be asking who voted Remain and who voted Leave as we cheer on our European team - seven Brits playing in the twelve-strong side, alongside their Spanish, Belgian, German, Irish and Swedish team-mates.

And now another important opportunity to get that message across suddenly presents itself.

Wenger for England. What better post-Brexit commitment to a new Entente Cordiale could we possibly make?

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.