US births at 11-year low set to prolong five-year housing slump
Frances Janisch had a daughter five years ago. Now she and her husband may not have a second child because income from their photography business in New York City is erratic.
"I always imagined I would have two, so it bothers me that I don't," said Janisch (41) who grew up with a large extended family in South Africa. "It has everything to do with economics."
Similar decisions to postpone or forgo having babies may delay the recovery from the five-year US housing slump and restrain future consumer spending on goods and services from child care to nappies, soaps and toothpaste.
Expenditures associated with one child for a middle-income family are $226,920 (€170,143) over 17 years, with housing the biggest expense, the US Department of Agriculture estimated in June.
The number of births fell to an estimated four million last year, the fewest since 1999, according to health statistics data. American families -- whose finances have been hurt by high unemployment, falling home prices and low pay raises -- lack confidence to plan for "explosions in spending" required by a new child, says Peter Francese, a demographic-trends analyst. US births may not recover until 2013, he predicts.
Families in the child-bearing years "have been hit hard" by the recession, said Mark Zandi, chief economist at Moody's Analytics, who estimates population for his economic forecasts.
"Slower population growth will exacerbate the slowing in economic growth."
He predicts expansion of 2.6pc in the fourth quarter and in 2012, too weak to bring down unemployment from averaging close to 9pc next year. The jobless rate has remained near or above that level since April 2009.
"The potential impact of a more sluggish birthrate is huge," said Mark Vitner, a senior economist at Wells Fargo Securities. "More households will likely choose to rent for longer periods of time, and there will be fewer trade-up buyers. I fear this is a trend that will likely persist."
The impact may be muted if recent signs of a pickup in the economy continue. Today's number of births is similar to 2001, when the US was in "the early phase of expansion" after an eight-month recession, said Charles Lieberman, chief investment officer with Advisors Capital Management LLC, and a former head of monetary analysis at the Federal Reserve Bank of New York. "Declines in births are births that are deferred, not births that are lost," he said.
Consumers' views on the US outlook improved in November, reaching a four-month high, according to the Bloomberg consumer comfort Index. Retail sales rose 0.5pc last month. First-time claims for unemployment insurance fell in the week ended November 12 to the lowest since April, a sign the work market may be rebounding, figures showed last week.
Sales of previously owned homes unexpectedly rose in October, a new report from the National Association of Realtors shows, a sign falling prices may be attracting buyers.
Purchases increased 1.4pc to a 4.97 million annual rate.
The median house price dropped 4.7pc from a year earlier. Total sales in 2010 were 4.9 million, compared with a peak of 7.07 million in 2005 during the housing boom.
"Birthrates usually fall during recessions," said Gary Becker, a University of Chicago professor and 1992 Nobel laureate who studies human behaviour. "Their effects on the economy depend on whether births rise when good times come, partly to make up for these delays."
A return to more babies can't come too soon for household-product makers.
"The low birthrate continues to be lower than was forecast early in the year, and so you're just not having as many new mums," Thomas Falk, chief executive officer of Kimberly-Clark, maker of Huggies nappies, said recently.
Newell Rubbermaid, which makes strollers and car seats, faces "sustained challenges" in its baby business, chief executive officer Michael B Polk said in October.
Birthrates "just haven't recovered", so "we're going to be living with slow-to-no growth markets next year".
Sales of nappies in the 52 weeks ended September 4 fell 5pc from a year earlier to $2.29bn, according to Chicago-based market researcher SymphonyIRI Group.
Estimates are that unit sales of these and other products including toothpaste, soap, tissues and paper towels may be unchanged or rise no more than 1pc annually during the next five years.
The fall-off in births is part of a vicious cycle that stems partly from the housing slump. Housing equity has been a key source of spending on children, according to a National Bureau of Economic Research study published last month. Each 10pc rise in housing prices results in a 4pc increase in births among homeowners, they found.
"People don't have children when they don't feel secure enough to provide for those children," demographer Mr Francese said. "Births reflect confidence in good or rising income over the next 10 years." A shortfall "reflects a lack of hope for the future." (Bloomberg)