Are You Ready for the Silver Tsunami?
Oceanside, CA – Like a pendulum, perceptions of the U.S. economy continuously sway from one report to the next. Last month, the ongoing housing revival and surprisingly strong consumer spending overcame the nation’s sequestration fears, resulting in record highs for the stock market. This month, drops in consumer confidence, retail sales, housing starts for single family homes, the Conference Board’s Leading Economic Indicators (LEI), the Fed’s Philadelphia Factory Index plus worries about global growth sent the Dow Jones plummeting. By the time this issue goes to press, the stock market could be up to a record high of 15,000 or down in the low 14,000s. Given this fickle backdrop, we attempt to keep our readers focused on the underlying trends and how they may be further evolving. One trend we will explore this month is what some economists call the "silver tsunami" or the pending impact from aging Baby Boomers — and how you can exploit that trend.
First, we take a look at the economy. The current data shows the economy cooling somewhat, maintaining the slow growth pattern we have been predicting for the rest of 2013. The Leading Economic Indicators declined (0.1)% in March; economists surveyed by Bloomberg expected a median gain of 0.1%. The Philly Index fell significantly from 2 to 1.3 when it was widely expected to climb to 3. Moreover, Europe continues to slide further into recession and China is scaling back growth to tame potential runaway inflation. Though lower than expected, China’s 7.7% growth in the First Quarter is still quite robust. Despite this cooling, the U.S. trends for housing, construction, industrial production, and employment remain positive:
- Even though housing starts for March were way down, new construction starts for single family homes for the 12 months ending March increased 29% and for apartments 82%. Homebuilder sentiment has been down for the past three months, but for the same 12 months ending March, it is up 75% from the prior year.
- Industrial production rose in March, and for the First Quarter, reached an annual rate of 5%. Capacity utilization also climbed in March.
- Jobless claims continue to gradually spiral downward since a high in 2009. This is evidence that layoffs are diminishing, but jobs creation is still tepid, growing just 88,000 in March.
Mark Vitner, senior economist at Wells Fargo Securities LLC, and the top-ranked forecaster for the Leading Economic Indicators, confirms our outlook: “We’re seeing economic growth cool off a little bit after a strong start to the year.” He also said, “There’s no question that growth is going to remain in positive territory.”
However, consumer spending appears most vulnerable. Ken Goldstein, an economist at The Conference Board, believes the largest challenge for the economy “remains weak demand, due to nervous consumer sentiment and slow income growth.”
Last month, we stated consumer spending is being supported by rising net worth due to higher stock and home values. “So far, this has more than offset the impact from the increased payroll tax,” said Frank Chow, chief economist for Trade Show Executive Media Group. In April, the weekly Bloomberg Consumer Comfort Index reached a five-year high, which implies consumers will continue to spend, albeit cautiously, in the near term.
The Silver Tsunami is Making Waves
In the long-term, consumer spending will be transformed by a demographic trend labeled the “silver tsunami.” Simply put, a tidal wave of retiring Baby Boomers is about to hit the country. We have started to see that also in the trade show industry with senior executives from leading shows and organizations announcing their retirement.
The first wave reached full retirement age of 65 in 2011. This means an average of 10,000 Boomers will be added to Social Security and Medicare rolls every single day for the next two decades! Based on 2010 Census data, those 65 and over are projected to nearly double to 78 million by 2030 and represent about 20% of the total population. In addition, the group aged 80 and over is the fastest-growing segment of the population due to parents of Boomers living longer. The combined effect will impact Americans of every age, said Sandy Markwood, CEO of the National Association of Area Agencies on Aging (N4A).
And the Boomer generation isn't just big; they’ve always been the trendsetters since appearing on the scene in 1946. From the outset, communities everywhere began building new schools to accommodate their arrival. They proceeded to redefine American life and culture as they grew up. Eventually, they produced the biggest economic and technological boom in history. So, as Boomers confront "old age," they will certainly challenge how companies currently do business and engage this huge population.
If you think Boomer seniors will cease participating in trade and consumer shows, then you may need to re-examine your assumptions. Trade show executives must not fall asleep at the wheel in adapting to this population because competition will swiftly fill the void.
Not yet convinced? Then chew on these facts from Frank Chow’s research and their implications on consumer spending and the potential for the exhibition industry:
- Boomers are the wealthiest generation in U.S. history. As Yahoo! Finance points out: "There is no denying the impact such a large group of people, mostly working taxpayers, has on the flow of money in the United States."
- The Federal Reserve estimates Boomers may leave estates valued at more than $8 trillion. This is the first generation that doesn’t need to liquidate assets upon retirement. Investment and trust advice will be going gangbusters.
- Nearly 70% of boomers are expected to live into their 80s and beyond. According to Marketwire.com: "Industry experts agree that the Baby Boomers spend more on health care than their parents did and are willing to pay more for services that improve their quality of life." Chow asserted, “Regardless of how you feel about ObamaCare, we may be at the cusp of the biggest explosion in health care and biotechnology ever experienced.”
- Boomers have an estimated annual spending power of more than $2 trillion.
- The Kauffman Foundation reported the number of Boomers starting a business jumped 7% from 1996 to 2011, the largest gain among all age groups. For people 20 to 44, new business starts actually fell about 5%.
Gray is the New Black, Blonde, Redhead
Finally, graying is also a global phenomenon. The world stands at the threshold of a stunning demographic transformation due to declining birthrates, rising life expectancy and aging Boomers. “The first trend is decreasing the relative number of young people, while the next two trends are escalating the number of old,” Chow pointed out. “Together, these forces are leading to an unprecedented aging worldwide.”
Chow noted that in 1970, half of the world’s population was younger than 20; by 2011 it had dropped to one-third. The United Nations projects it will be closer to one-quarter in 2050. Meanwhile, those older than 65 increased from 5% to 9% between 1970 and 2011 and will climb to over 20% by 2050. Despite the global population growing 2 billion by mid-century, the absolute number of young people will be no larger than today, but the elderly will have risen from 648 million to 1.9 billion.
“The aging trend began in the developed world and is now accelerating in the developing world,” Chow noted. In today’s developed world, seniors comprise roughly 15% of the population. By mid-century, the share will reach 25%. In some European countries such as Germany and Italy, the share will be approaching 35% and in Japan it will top 40%.
The developing world as a whole is still much younger, but it too is aging. In some countries, such as Mexico and China, Chow said the population is growing old at a breathtaking pace. By the 2040s, the population of Mexico will be nearly as old as the U.S. and China will be older. Meanwhile, South Korea will be vying with Germany, Italy, and Japan for the title of the country with the oldest population on earth. This rapid aging means nations have less time to establish the infrastructure and policies to meet the needs of their shifting populations.
The U.S. has the youngest average population of any developed country, and is expected to keep that designation in the future, but Brazil takes the overall prize for the youngest total population, both now and likely in 2050. Clearly, the rapid growth of U.S. seniors will place an ever-growing strain on the government's social services programs, including Social Security, Medicare and Medicaid, to provide quality services within severe budgetary constraints.
This reality opens an opportunity for the private sector to bridge the inevitable gap. The trade show industry can begin to take leadership in this area now. Pavilions or special product areas for seniors can be created at many shows, from apparel to medical to woodworking. Accommodations for the disabled, from parking spaces to ramps, can be expanded as well as similar special services for senior citizens. Increasing rest and seating areas at shows, as well as modifications in menus [smaller portions and healthy choices], are another wise option. As demographics change, savvy show organizers will be looking at other opportunities for reaching out to this lucrative senior market.
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