Sunday, October 17, 2021

Blame It on the Boomers

Ask The CFP® Practitioner

“How low can you go?”

~ Chubby Checker

Question: Why have interest rates stayed so low for so long? Can this continue?

Answer:  The short answer is that interest rates may remain low for many more years.   Why they’re at these levels is an important question. Interest rates reflect the cost of money. If the cost of money is lower, we’d expect a relatively higher level of economic activity. One reason to raise rates would be to slow down an overheated economy, as measured by inflation of prices and wages. At this point, with unemployment at 50 year lows, and no meaningful price or wage inflation, there is likely no reason to raise rates.

Historically, at this stage of an economic recovery, inflation and higher interest rates are often expected. There is a difference this time though and it’s based on demographics. Between 1946 and 1964, seventy-six (76) million Baby Boomers were born in the United States. My husband Pete and I represent bookends of the BB generation. Pete’s in the 67-73 bracket, while I fall into the 55-61 group. Comprehending the impact of the BB phenomenon and generational grouping is easier to do when you’re living examples of how population trends affect the economy.

Boomers began making our mark on the workforce in the 1970s. Many in that first wave are now well into their retirement years. Plenty of the younger Boomers are still working and staying in place longer than previous generations. During the late 1990s and early 2000s, when most Boomers were at our peak, the economy was red hot and the Federal Deficit actually even disappeared for a short while. Growing numbers of working men and women fueled the economy. According to the Bureau for Labor Statistics, the labor force participation rate hit an all-time high of 67.30% in January 2000.   

As the Boomer work force begins to decline, there are economic implications that help explain today’s low inflation and low interest rates. In previous economic cycles, Boomer population growth and increased productivity drove prices higher. There were more people chasing a limited supply of goods and services, so prices increased. Today’s lower demand is one factor keeping rates down.

According to the Census Bureau, of the 76 million Boomers, 73 million are still alive and 33 million continue to work. The three generational groupings range from 55-61, 61-67 and 67-73. Not surprisingly, 72% of the youngest, 57% of the middle group and 33% of the oldest remain in the workforce. As we continue to fall off the list of gainfully employed individuals there are fewer workers coming up behind us. This is why things are different regarding interest rates, inflation and the economic cycle.

In 2016, there were 1.2 million more births than deaths in the United States. That may sound like solid growth and a good thing, yet the Census Bureau reported in December 2018 that the US population grew at its slowest pace in more than 80 years. As babies are born they ride a continuous wave representing life-cycle stages with differing economic impact each year. The chart depicts U.S. demographics from 1909 through 2017 by generational groupings; the Greatest Generation, the Silent Generation, Boomers, Gen X, Y, Z and Alpha. It’s not until 2007 that we see live births surpassing that of Baby Boomer numbers. Our three grandchildren were born in 2005, 2006 and 2007. It will be interesting to see what sort of economic opportunities await them as they enter the workforce. 

Gen Xers are currently age 39-53 and likely experiencing peak earning years. The reason this won’t likely increase inflation is that there are far fewer of them than there were BBs at the same stage of life. The sweet spot for BBs was between 1995 and 2007 when technology and innovation dramatically increased productivity. That fact, coupled with the sheer number of BBs, resulted in inflationary pressure and ultimately interest rate increases. That’s not the case right now.

Economics and demographics are forever linked. The United Nations indicates that the working age population in all areas of the world is declining, whether it’s Japan, the Eurozone or the United States.

Based on world population trends, it’s unlikely that we’ll see rates rising. There’s not an immediate need to slow an overheated economy so we likely won’t need interest rate cuts. Just because rates are not expected to go higher anytime soon, it doesn’t mean that there won’t be volatility in financial markets. Stay focused and plan accordingly.

The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. Views are as of June 11, 2019 and subject to change based on market conditions and other factors. The data and information contained herein was obtained from sources considered to be reliable, but accuracy and completeness are not guaranteed. Past performance is no assurance of future results. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. All investments contain risk, including loss of principal. Views are as of June 11, 2019 and subject to change based on market conditions and other factors “Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”   This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at (239)389-1041, email Website:

This article is provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. Call or email Darcie at 239-389-1041 or with questions or suggestions for future columns. Visit her website:

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