Would you start a family if you were pessimistic about the future of the economy? Buckles et al (2017) (see link below) believe that fewer of us would do so and, therefore, fertility rates could be used by investors and central banks as an early signal to pick up subtle changes in consumer confidence and overall economic climate.
Their study titled ‘Fertility is a leading economic indicator’ uses ‘live births’ data, sourced from US birth certificates, to explore if there is any association between fertility changes (measured as the rate of change in number of births) and GDP growth. Their results suggest that, in the case of the USA, there is: dips in fertility rates tend to precede by several quarters slowdown in economic activity. As the authors state:
The growth rate of conceptions declines prior to economic downturns and the decline occurs several quarters before recessions begin. Our measure of conceptions is constructed using live births; we present evidence suggesting that our results are indeed driven by changes in conceptions and not by changes in abortion or miscarriage. Conceptions compare well with or even outperform other economic indicators in anticipating recessions.
Although this is not the first piece of academic writing to claim that fertility has pro-cyclical qualities (see for instance, Adsera (2004, 2011), Adsera and Menendez (2011), Currie and Schwandt (2014) and Chatterjee and Vogle (2016) linked below), it is, to the best of our knowledge, the most recent paper (in terms of data used) to depict this relationship and to explore the suitability of fertility as a macroeconomic indicator to predict recessions.
Economies, after all, are groups of people who participate actively in day-to-day production and consumption activities – as consumers, workers and business leaders. Changes in their environment should affect their expectations about the future.
Are people, however, forward-looking enough to guide their current behaviours by their expectations of future economic outcomes? They may be, according to the findings of this study.
Did you know, for instance, that sales of ties tend to increase in economic downturns, as men buy more ties to show that they are working harder, in fear of losing their job? But this is probably a topic for another blog.
- Economists urged to use fertility to predict recessions
Financial Times, Gemma Tetlow (25/2/18)
- Can you predict a recession by looking at pregnancy rates?
BBC News (26/2/18)
- Can pregnancy rates predict a recession? America’s top economic research bureau thinks so
CNBC, Natasha Turak (26/2/18)
- Study points to fertility as a leading economic indicator
Notre Dame News, Shannon Roddel (26/2/18)
- Pregnancy Rate Might Predict Future Recessions, Researchers Suggest
the Two-Way blog, NPR, Camila Domonoske (27/2/18)
- Can hemlines and divorce rates really predict a recession?
The Guardian, James Ball (27/2/18)
- Fertility Is a Leading Economic Indicator
University of Notre Dame Working Paper, Kasey Buckles, Daniel Hungerman and Steven Lugauer (October 2017)
- Changing fertility rates in developed countries. The impact of labor market institutions
Journal of Population Economics, Alícia Adserà (February 2004, Volume 17, Issue 1, pp 17–43)
- Fertility changes in Latin America in periods of economic uncertainty
Population Studies, Alicia Adserà and Alicia Menendez (March 2011;65(1):pp37–56)
- Short- and long-term effects of unemployment on fertility
PNAS, Janet Currie and Hannes Schwandt (14/10/14; 111(41): 14734–9)
- Growth and Childbearing in the Short- and Long-Run
NBER Working Paper 23000, Shoumitro Chatterjeea and Tom Vogl (December 2016)
- Give two reasons why fertility rates may be a good indicator of economic activity.
- Give two reasons why fertility rates may NOT be a good indicator of economic activity.
- Do a literature search to identify and explain an ‘unorthodox’ macroeconomic indicator of your choice, and how it has been used to track economic activity.