A few months ago, I asked if having a child in the United States was increasingly becoming a luxury item? It appears the ‘marketplace’ is adjusting to the new reality, despite the multi year economic ‘recovery’ as the national birth rate has dropped to a 11 year low. The absolute number is actually worse than that when you consider the population is substantially larger now than it was 11 years ago. These type of figures are a far more realistic take on what is happening in the real economy, versus the government hocus pocus statistics. It also speaks to the increasingly skew of income distribution and eroding middle class I’ve been talking about for 4 years (far before it was fashionable). Readers from 2007 and 2008 will remember the “pooring of America” theme….
*excluding government assistance for those on the lower end of the income spectrum.
- Similar decisions to postpone or forgo having babies may delay the recovery from the five-year U.S. housing slump and restrain future consumer spending on goods and services from child care to diapers, soaps and toothpaste. Expenditures associated with one child for a middle-income family are $226,920 over 17 years, with housing the biggest expense, the U.S. Department of Agriculture estimated in June.
- The number of births fell to an estimated 4 million last year, the fewest since 1999, according to National Center for 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 in Exeter, New Hampshire, for the MetLife Mature Market Institute.
- Families in the child-bearing years “have been hit hard” by the recession, said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who estimates population for his economic forecasts. “Slower population growth will exacerbate the slowing in economic growth.”
- “The potential impact of a more-sluggish birthrate is huge,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “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.”
- “Birthrates usually fall during recessions,” (but we’ve been in ‘recovery’ for nearly 3 years Mr. Becker) said Gary Becker, a University of Chicago professor and 1992 Nobel laureate who studies human behavior. “Their effects on the economy depend on whether births rise when good times come, partly to make up for these delays.”
- “The low birthrate continues to be lower than was forecast early in the year, and so you’re just not having as many new moms,” Thomas Falk, chief executive officer of Kimberly-Clark Corp. (NYSE:KMB), maker of Huggies diapers, said on a conference call with investors Oct. 24. “With the weaker economy in the near term, I’d say the category is probably going to be a little softer in 2012 than our prior long-range forecast would have indicated.”
- Newell Rubbermaid Inc., which makes strollers and car seats, faces “sustained challenges” in its baby business, Chief Executive Officer Michael B. Polk said in a conference call with investors Oct. 28. Birthrates “just haven’t recovered,” so “we’re going to be living with slow-to-no growth markets next year.”
- The annual cost of raising a child ranges between $11,880 and $13,830 for a two-parent family earning $57,600 to $99,730, according to the Department of Agriculture. After housing, the largest expenses are for child care, pre-college education and food. The total for a child in an upper-income family may reach $377,040 by age 17.
- States with the largest economic declines in 2007 and 2008 were most likely to have relatively large declines in babies from 2008 to 2009, based on an analysis in October by the Pew Research Center. (that factoid required a study?) Arizona, Florida, Georgia and Nevada all suffered birthrate drops that exceeded the U.S. average, Pew data show.
- Housing equity has been a key source of spending on children, according to a National Bureau of Economic Research study published last month by University of Maryland economists Lisa Dettling and Melissa Kearney. Each 10 percent rise in housing prices results in a 4 percent 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 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.”
- Family size fell during the Great Depression to an average of 2.3 children in 1933 from 3.5 children in 1900, according to the U.S. Centers for Disease Control and Prevention. The number rebounded to as many as 3.7 in the 1950s, then began to decline again with the advent of modern contraceptives, stabilizing at about two children in 1972, government data show.
- Two-thirds of 1,000 mothers in an August Johnson & Johnson BabyCenter survey said financial concerns would affect how many children they have, with most planning two rather than a desired three.
Companies to Watch: The Procter & Gamble Co. (NYSE:PG), Cardinal Health, Inc. (NYSE:CAH), Church & Dwight (NYSE:CHD), Colgate-Palmolive (NYSE:CL), Clorox (NYSE:CLX), Johnson & Johnson (NYSE:JNJ), Zep (NYSE:ZEP) and Avon Products (NYSE:AVP).
Trader Mark is the author of Fund My Mutual Fund.