The Great Recession triggered a steep decline in the U.S. birth rate, but signs show the downward trend may be slowing.
U.S. births are down -10% since 2008. In other words, the cumulative decline over the last five-plus years means almost 1.5 million American babies have not been born. That’s obviously a lot of babies who will never exist, never grow up, never go to school, never enter the workforce (not to mention have their own families) and so on—especially when compared to the 3.8 million kids under one-years-old in the United States today.
While the economic toll of the Great Depression during the 1930s engineered the biggest decline in birth rates over the last century, this present decline is pretty close in scale. Fortunately, the decline of births which occurred during the Depression was eventually followed by the Baby Boomers, The Boomer Echo, as well as the multiple generations in between. These cycles clearly play big roles in economic, political, and social trends as the synchronized peaks and troughs of millions of people wind through the system.
The recent decline is suggesting that a large number of young American adults and potential parents are signaling that they are not quite ready—financially or otherwise—to take on the significant commitment of a life, and a lifetime. That’s a lot of “leaning in” going on: (see Lean In: Women, Work, and the Will to Lead by Facebook COO Sheryl Sandberg) if indeed we are witnessing a deeper, secular change in the attitude women and their partners have toward having children.
That said, our model below shows why we believe the baby making tide may be turning.
While we can’t measure attitudes, we can measure the result using some clever manipulation of data the federal government produces each month. Small positive percentage changes in the last 6 months may mark the beginning of a much bigger move over years to come. After all, there are millions of biological clocks ticking away all across the country.
There are plenty of reasons to care about the trend in baby making in the United States. Our focus and work on the US Medical Economy has drawn us into the analysis; For example, having a baby is the single biggest reason anyone not on Medicare is admitted to a hospital, accounting for 30% of all hospital admissions.
But there are many other reasons to care about declining birth rates, some of which can imperil entire economies and countries. Some of the more obvious implications from a drop in births include the related and chilling effect on retail spending, education, housing, food, and so forth. In other words, less babies means less spending on baby clothes (CRI), toys (MAT) and Happy Meals (MCD). Not to mention an aging workforce heading into retirement and attendant strains on Social Security and tax revenue. On the other hand, “Junior” may have a better shot getting into the college of his choice in 2028.
Look no further than countries like Russia and Japan which are both concerned over declining births in their respective countries. Japan is aggressively encouraging its young people to date and mate to reverse its birth rate plunge which has dropped to just half of what it was only six decades ago.
Meanwhile, “Mother Russia” hasn’t exactly been living up to its name of late and is facing its own plunging population crisis. Not too long ago, Vladimir Putin went so far as incentivizing women with $9,200 to have a second baby—that’s in a country where average monthly incomes are a small fraction of that.
Bottom line: We are bullish on American baby making. We believe an uptick in U.S. births is coming. Of course, there is always the alternative downside scenario lurking in a Children of Men like dystopian future if we’re wrong.
Tom Tobin is the Healthcare Sector Head at Hedgeye Risk Management. You can follow him on Twitter @HedgeyeHC