There are also the demon hunters like Sid all over the place.
And also remember that demons usually have to be summoned; so they may indeed be overpopulated, but they're overpopulating another plane, or whatever you want to call it.
Hmmm. Also, maybe not all demons reproduce; you could think of it almost like a beehive setup, where there's one big high-level demon (queen) and a bunch of lower level demons (workers) that do the high-level demons bidding. That's similar to the setup in Charmed; there's the Source, and then all the other little assassins and Balthazars out there.