America 2040
Three trends will shape the country over the next two decades
[AI generated]
Key takeaways
1. New trends like remote work will reshape America’s geography
2. Rising costs and supply shortages are destroying housing affordability
3. Declining birth rates and immigration complexities pose challenges for labor and welfare systems
After WW2, two trends reshaped America’s geography and transformed the country: suburbanization and the baby boom. Soldiers returning from overseas had access to low-interest, zero-down payment mortgages through the GI Bill. Additionally, the Federal Highway Act of 1956, which initiated the Interstate Highway System, allocated $25 billion to the construction of 41,000 miles of interstate highways. These factors, combined with general economic prosperity, led to rapid suburbanization across the country. Between 1950 and 1970, the U.S. suburban population doubled from 36 million to 74 million, a rate 10x faster than cities.
All these returning soldiers were in a hurry to start families and the birthrate increased about 33% from pre-WW2, to over 120 births per 1,000 women. During the boom, typically defined as 1946-1964, more than 76 million babies were born in the U.S. This means that by the end of the boom, "Baby Boomers" made up almost 40% of the nation's population. The boom also had the effect of reinforcing suburbanization as families looked for more space.
In 2023, three equally dramatic trends will shape America’s future: the rise of remote work, rising housing costs, and a baby bust. This post will explore these trends and the upcoming America 2040 series of articles on Ad Astra will discuss how America should respond so that in 2040 it is a “city on a hill”
Remote work
The pandemic forced companies to find ways to stay open without employees coming into the office. It turned out that work could go on through video teleconferencing technology. Home office remodels boomed and people bought homes in 2nd tier, non-coastal cities like Boise, ID and Billings, MT. After the pandemic, not everyone returned to the office and “remote work” seems to be a permanent feature of American life, especially as a labor shortage gives workers extra power. The untethering of home and work colocation could have geographic ramifications as great as the Industrial Revolution, which brought workers from the farms to factories in the cities.
Figure 1: Staying power of remote work
House prices
Housing prices are soaring in the US, which is great if you own a home but horrible if you want to buy a home. The median home price in the US is an incredible $400k. Two factors are responsible for this rise: higher interest rates and a housing supply shortage. To combat inflation, the Federal Reserve has raised interest rates which translates into higher mortgage rates. All other things equal, the typical monthly payment on a 30-year fixed mortgage for a hypothetical $400k home is $2,935.57/mo in October 2023 versus $1,837.91/mo in October 2019, a $1,097.66/mo rise. All else is not equal and there is a housing supply shortage causing home prices to rise, originating after 2008 Subprime Mortgage crisis. Since 2008, 13.5 million new homes have been built but the population has grown by 27 million.
Figure 2: US home price growth after the COVID-19 pandemic
Baby bust
Birthrates in the US have been plummeting, especially since the 2008 financial crisis. Since 2008, birthrates have fallen 36% to around 55 births per woman. Because we know it takes 32 years to make a 32-year-old worker, the US will face major labor shortages by 2040. And since pensions, Social Security, and Medicare rely on workers to support retirees, those welfare models will be increasingly strained by 2040. Some say that immigration will be the fix, but today’s 14.6%[i] share of foreign-born citizens, just below the American all-time high of 14.8% in 1890[ii], is among the highest in US history. That level of immigration is destabilizing our democratic politics. Regardless of your own views on immigration, there may be a limit to which immigration can alleviate society’s baby bust.
Figure 3: Declining US birth rates
America stands at an inflection point in history, shaped by the confluence of historical trends and emerging challenges. The echoes of post-WW2 suburbanization and the baby boom still reverberate, serving as reminders of how societal shifts can fundamentally alter the nation's trajectory. Fast forward to 2023, and remote work, spiraling housing costs, and the baby bust outline the contours of America's next transformative phase. These trends not only challenge our conventional understanding of work, home, and societal structures but also beckon us to reimagine and reinvent our future. These trends will inform the America 2040 series and show a path forward, a blueprint for a nation striving to evolve, adapt, and model the "city on a hill". As history has shown, America's capacity for reinvention amidst change remains one of its most enduring strengths. The question now is not just how we'll respond, but how we'll shape the future to reflect the best of America.
In case you missed it - Ad Astra online
[i] https://cis.org/Report/ForeignBorn-Population-Hits-Nearly-48-Million-September-2022
[ii] https://www.migrationpolicy.org/article/frequently-requested-statistics-immigrants-and-immigration-united-states