How COVID-19 turned a 'baby bust' into a 'baby bump'

By Mark Hulbert

Doom-and-gloom scenarios about the future of the family and the U.S. economy have not materialized

Evidence is mounting that the much-anticipated and much-feared "baby bust" has morphed instead into a mini "baby boom," or at least a "baby bump."

This has potentially very bullish long-term consequences.

Demographers had originally predicted that the COVID-19 pandemic and associated economic lockdowns would lead to a big drop in fertility. If that had materialized, it would have been above what was already a sharply declining fertility rate in the U.S. In 1976, according to data from the Centers for Disease Control and Prevention, the total number of children born to the average U.S. woman was close to 3. In 2019, the year before the pandemic, it was just 1.3--well below the rate necessary to maintain the U.S. population at its current size.

These worsening trends led some doom-and-gloomers to openly speculate about the future of the family and even the survival of the U.S. economy in a currently-recognizable form. Not only have these nightmare scenarios not materialized, according to a recent research report from Ned Davis Research, but the demographic outlook in some ways is now brighter than it was before the pandemic. "The unexpected demographic upside from the pandemic," was written by Alejandra Grindal, NDR Chief Economist, and Patrick Ayers, NDR Senior Analyst.

The "unexpected" factor to which the researchers refer is how the "work from home" movement has led to a dramatic increase in the workforce participation rate among women. This is a likely cause of the baby bump because flexible work makes it easier for women to juggle work and family which, in turn, allows them to have more children.

Though more research is necessary to conclusively show that the work-from-home movement is having this demographic effect, recent data are certainly suggestive:

Demography as destiny?

The possibly very bullish consequences of the baby bump will only materialize over the very long term. Fertility is not a short-term market timing indicator by any means. But the economy and the stock market are so strongly correlated with fertility over the longer term that some even believe that demography is destiny.

Wouldn't it be ironic if the COVID-19 pandemic, by increasing the labor-force participation rate among women, turns out to have long-term bullish consequences for both the economy and the stock market?

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.

-Mark Hulbert

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09-18-23 1128ET

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