According to the Department of Labor, there were 27.0 million “foreign-born” persons in the US labor force in 2016, comprising 16.9% of the American workforce. The percentage of “foreign-born” workers was 13.3% in 2000.
In the last ten years, the U.S. working age population Increased by only 0.6%, less than half of the rate seen in the decade prior. In fact, the Census Bureau has projected that growth will decelerate further over the next decade, again halving to 0.3%. Due to a reduction in native-born population growth: native-born Americans contributed 85% of population growth between 1977 and 1986. Currently, they are forecasted to contribute less than 15%.
As shown in the chart below, the U.S. fertility rate has dropped dramatically since the “baby boom,” and is at its lowest level in recorded history. A low fertility rate, obviously the source of weak population growth will have a direct impact on the available labor force and household formation.
JP Morgan Asset Management suggests that “Given the release of the president’s budget last week, which outlines a series of policies predicated on 3% long-term economic growth: labor force constraints will lead to supply-side constraints, and ultimately result in reduced consumer demand and weaker household formation, all of which will make accelerated economic growth a challenge. Moreover, this trend will likely continue into the future. This demographic challenge facing the U.S. – and other developed countries – suggests that emerging markets deserve a place in a portfolio, due to higher growth potential thanks in part to generally favorable demographics.”
As indicated by the last twelve month return of over 30% in the MSCI Emerging Market index, investors are starting to recognize the opportunities that exist in overseas markets.
International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indexes. The index’s three largest industries are materials, energy, and banks. Keep in mind that indexes are unmanaged and individuals cannot invest directly in any index. Index performance does not include transaction costs or other fees, which will affect the actual investment performance. Individual investor results will vary. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. Opinions expressed are not necessarily those of Raymond James. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.