Report: An aging Florida ushers in ‘new regime,’ and new opportunities, for investors

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A new report released by one of the world’s largest asset managers affirms that the markets are in a new regime — meaning new factors and focuses within the market.

Generally, aging populations earn less, affecting consumer spending and public finances. Given that Florida’s median age skews older — 42.2 years — BlackRock Investment Institute’s 2023 Midyear Outlook’s observations on the aging population are particularly relevant.

“The global labor force is growing more slowly than it has since the Second World War. Reduced labor supply limits how much an economy can produce and grow — and leaves fewer workers to support a larger non-working population,” the report reads.

“That impacts government spending and debt: per capita revenue from income tax falls, as spending on retirement-related benefits like pensions and healthcare rises. That could lead to more government borrowing, at a time when rising interest rates are already increasing debt burdens.”

Population aging is already a binding constraint on the U.S. labor supply, and it’s a particularly prescient concern in Florida, which ranks No.2 for residents over the age of 65, who account for 21.3% of the state population.

Based on the information in the Midyear Outlook, an aging population in the state could prove inflationary. Not because older populations consume less, but because demands shift toward other categories, such as a higher demand for health care.

Therefore, lower production capacity would not necessarily result in a commensurate drop in spending. That’s why aging contributes to the “new regime” and creates more difficult policy choices for central banks.

The Midyear Outlook provides insights into upcoming opportunities in health care, real estate, leisure and companies with products and services for seniors. It also offers a textbook example of what an aging population could portend for the state and national economy.

“Japan offers an interesting case study: Its working-age population has been shrinking since 1994. Japan didn’t see higher inflation because economic activity was hurt by the bursting of its asset price bubble in the early 1990s. Yet it does give a glimpse of the growth effect: Since 1990, government data show that hours worked in Japan fell as the working-age population peaked and started to shrink. Japan offset some of the fall in working-age population by growing the share of women in the workforce. Other (developing markets) might struggle to do the same since female participation is already higher,” the report states.

Notably, workforce participation among U.S. women of prime working age (25 to 54) hit at an all-time high of 77.5% this year.

The report continues, “Other options: increase immigration or raise the retirement age, each of which has political considerations. Or it can be partially offset by higher productivity, perhaps helped by AI.”