Birth rate poses risk to econ­omy

At 30-year low, it may threaten U.S. growth

San Francisco Chronicle Late Edition - - BUSINESS - By Christo­pher Ru­gaber Christo­pher Ru­gaber is an As­so­ci­ated Press writer.

WASH­ING­TON — Women in the United States gave birth last year at the low­est rate in 30 years, a trend that could weigh on eco­nomic growth in the com­ing decades.

The Cen­ter for Dis­ease Con­trol and Preven­tion’s Na­tional Cen­ter for Health Sta­tis­tics said Thurs­day that the num­ber of U.S. ba­bies born last year fell 2 per­cent from 2016 to 3.85 mil­lion, also a 30-year low. Births have fallen for three straight years. The fer­til­ity rate dropped 3 per­cent last year to 60.2 births per 1,000 women ages 15 through 44.

An ag­ing so­ci­ety has al­ready weighed on eco­nomic growth in the United States in the past decade, with the vast Baby Boom gen­er­a­tion retiring and fewer young peo­ple re­plac­ing them. Thurs­day’s data sug­gests that the trend is likely to con­tinue.

Eco­nomic growth is gen­er­ally driven by pop­u­la­tion growth and worker ef­fi­ciency, both of which have slowed in the past decade in the United States.

Kathy Bost­jan­cic, an economist at Ox­ford Eco­nom­ics, a con­sult­ing firm, said that roughly 10 years ago, the num­ber of Amer­i­cans work­ing or look­ing for work was grow­ing about 1 per­cent an­nu­ally. With birthrates de­clin­ing, that fig­ure has since fallen to about a 0.3 per­cent growth rate. That essen­tially acts as a 0.7 per­cent­age point drag on the United States’ long-run growth rate.

“De­mo­graph­ics have a re­ally pow­er­ful im­pact on the econ­omy,” Bost­jan­cic said.

The U.S. econ­omy has grown at a 3 per­cent av­er­age an­nual rate since World War II. Yet it hasn’t reached that pace for a full cal­en­dar year since 2005. The Baby Boomers first reached re­tire­ment age in 2008.

The Fed­eral Re­serve in March up­graded its short­term eco­nomic growth fore­cast to about 2.7 per­cent for this year and 2.4 per­cent in 2019, partly be­cause of the Trump ad­min­is­tra­tion’s tax cuts. But the Fed kept its longer-run an­nual growth fore­cast at 1.8 per­cent, re­flect­ing the de­mo­graphic chal­lenges.

Aside from fewer work­ers, an ag­ing so­ci­ety can hold back growth be­cause fewer peo­ple are buy­ing homes, cars and other costly pur­chases. Sav­ings gen­er­ally rise as peo­ple age and pre­pare for re­tire­ment. And as elderly peo­ple live longer, they also slow their spend­ing while in re­tire­ment, Bost­jan­cic noted.

Most econ­o­mists at­tribute the low in­ter­est rates and low in­fla­tion of the past decade, in the United States, Europe and Ja­pan, at least in part to ag­ing.

In Ja­pan, where adult di­a­pers out­sell those for chil­dren, the im­pact of fewer births has kept growth nearly nonex­is­tent for more than two decades. The econ­omy has picked up re­cently and en­joyed two straight years of growth, the long­est such streak since the late 1980s, be­fore con­tract­ing again in the first three months of this year.

The U.S. ac­cepts many more im­mi­grants than does Ja­pan, and that in­flux has boosted pop­u­la­tion growth. The La­bor Depart­ment re­leased sep­a­rate data Thurs­day show­ing that last year, there were 27.4 mil­lion foreign-born work­ers in the United States, the most since records be­gan in 2005. Im­mi­grants now make up 17.1 per­cent of the U.S. work­force.

Eco­nomic re­search ear­lier this year found that U.S. fer­til­ity fell sharply roughly nine months be­fore the past three re­ces­sions. That sug­gests that such de­clines could sig­nal eco­nomic down­turns.

But Kasey Buck­les, an eco­nom­ics pro­fes­sor at Notre Dame who con­ducted the re­search with two col­leagues, said that re­cent such de­clines aren’t sharp enough to point to a re­ces­sion.

In­stead, she noted that fer­til­ity de­clines over the past three years have oc­curred mostly among women un­der 30. Birth rates among older women have risen or held steady. That sug­gests that the fer­til­ity de­clines re­flect largely a drop in un­wanted preg­nan­cies since the 2008-2009 re­ces­sion.

Fer­til­ity among women of all ages fell sharply in 2008 and 2009, Buck­les said, but re­bounded quickly for women 30 and over. Sep­a­rate data from the Guttmacher In­sti­tute, a pol­icy or­ga­ni­za­tion that tracks re­pro­duc­tive health, shows that un­wanted preg­nan­cies have fallen since the Great Re­ces­sion, Buck­les said.

“It’s pos­si­ble that the Great Re­ces­sion may have been some­thing of a trig­ger­ing event that caused peo­ple to be more in­ten­tional about their fer­til­ity,” she said.

Seth Wenig / As­so­ci­ated Press 2017

Women in the United States gave birth last year at the low­est rate in three decades, a trend that could weigh on eco­nomic growth in fu­ture decades.

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