The Surprising Impact of the Pandemic on Fertility

Evidence suggests that the anticipated "baby bust" caused by the COVID-19 pandemic has turned into a mini "baby boom" or, at the very least, a "baby bump." This unexpected development could have significant long-term implications.

Initially, demographers predicted that the pandemic and subsequent economic lockdowns would lead to a sharp decline in fertility rates. This would have added to an already declining trend in the United States. In 1976, the average American woman gave birth to nearly 3 children according to data from the Centers for Disease Control and Prevention. However, by 2019, just before the pandemic hit, that number had dropped to a mere 1.3 children per woman—an insufficient rate to sustain the current population size.

The unexpected factor highlighted by the researchers is the impact of the "work from home" movement on women's workforce participation rates. This change in work dynamics has likely contributed to the baby bump phenomenon because flexible work arrangements make it easier for women to balance their careers and family life, ultimately allowing them to have more children.

While further research is needed to establish a definitive link between the work-from-home movement and its demographic effects, recent data certainly point in that direction:

The Rise of Women in the Labor Force: A Promising Indicator for Birthrates

The COVID-19 pandemic has had profound effects on the global economy, but there is an unexpected silver lining emerging. In developed economies, the labor-force participation rate (LFPR) for women aged 25 to 54 has surpassed pre-pandemic levels. This upward trajectory in female LFPR has significant implications for birthrates, as highlighted by Grindal and Ayers. They observe that higher incomes resulting from increased female employment make it more feasible for families to have more children. This positive correlation is illustrated in the chart below by the red line, representing the upward trend.

Encouraging Trends in the United States

The United States has witnessed particularly encouraging trends in female LFPR. Notably, not only has the LFPR among women aged 25 to 44 rebounded from pre-pandemic levels, but it has also reached its highest point in over two decades. This resurgence in female participation in the labor force indicates a promising shift in societal and economic dynamics.

The Impact of Education and Remote Work

Grindal and Ayers draw attention to a recent study circulated by the National Bureau of Economic Research. This study reveals a significant increase in birthrates among women aged 30 to 34 with a college education. Astonishingly, this specific cohort had experienced a decline in fertility rates prior to the pandemic. However, they now seem to be benefiting the most from the work-from-home movement. This newfound flexibility and balance between career and personal life are contributing factors to their decision to have children.

Demography: A Driving Force?

While it is crucial to note that fertility rates are not short-term market indicators, their long-term impact on the economy and stock market cannot be overlooked. Many argue that demography plays a fundamental role in shaping the future. Consequently, it is intriguing to consider whether the COVID-19 pandemic, by propelling the labor-force participation rate among women, could have unforeseen positive consequences for both the economy and the stock market in the long run.