Hedgeye’s Health Care sector head, Tom Tobin, is out in front of what looks like a major demographic trend. Tobin’s analysis of US birth data suggests a connection between increases in the birth rate, and improved economic activity. In short: people who feel secure in their economic well-being are more likely to start, or increase, families.
Tobin ran a survey of OB/GYNs regarding expected birth trends for 2013 in four regional markets with varying economic trends during the Great Recession – Houston, Denver, Tampa, and Cleveland. In Houston, the strongest market, birth rates never went negative, while in Cleveland, the weakest market, births have yet to recover. However, preliminary survey results suggest a positive trend in births in each of the four markets for 2013; a first since the Great Recession started. Tobin notes there is also a positive correlation between birth trends and employment of women – suggesting a hidden source of strength in the economy. See the chart below.
On balance, our Birth Recovery theme – the “expecting expectation” – is a positive data point for housing, and for economic recovery in general. Most analysts appear to be unaware of this key metric.