With recession, fewer babies being born

It's a decision that begins in bedrooms and echoes in boardrooms: a caution about conception, thanks to the recession, that has resulted in fewer babies being born in the United States.

The number of total births went down in 2008 and 2009, according to recent population data, and the trend is not just a watercooler topic for the curious. It has become a preoccupation of Wall Street analysts, who wonder how long it will affect the fortunes of one of Philadelphia's major corporations, clothing manufacturer/retailer Destination Maternity.

"We now, for 2009, have 4.1 million births - which if you compare it to 2007, where there were 4.3 million births - [means] 4.2 percent fewer births," Destination Maternity chief executive officer Ed Krell said in an interview this week on a topic that has come up in earnings calls over the last few months.

"Not only do we have the issue of 4.2 percent fewer potential customers," Krell said, "but the other 95 percent that's still there certainly does not have the kind of disposable income and discretionary funds that they had back in '07."

Recessions not only dampen people's spending, they seem to change minds about one of the most fundamental aspects of existence. Births have gone down during many major economic downturns.

Evidence of the latest recessionary drop in maternity-ward visits was laid bare in August by the National Center for Health Statistics, which released full-year 2009 figures.

Demographers found that, after an all-time high in 2007, the total number of births in the United States fell 2.6 percent last year and 1.6 percent in 2008.

The decline was borne out, too, by fertility rates during the period, which measure how many children were born for every 1,000 women of childbearing years (15 to 44).

Fertility rates dropped to 66.8 last year from 69.2 in 2007, said demographer Paul Sutton, lead author of the report issued late last month by the health statistics agency.

The decline, Sutton said, is not precipitous: Even the lower fertility rate in 2009 is about where it was in 2005, before the latest recession.

"Since 1980, we've been within a range of from 68 babies per 1,000 women to about 71 babies," he said.

Sutton chuckled as he noted that some people have exaggerated the recent decreases, "like we're going into a Great Depression of Babies."

That's not the case, he said, yet the declines in births and fertility rates since the recession that began in December 2007 are statistically "absolutely significant."

"The number of births has declined, and the decline is very consistent with the timing of the recent economic decline," said Sutton. Still, he warned, it is too soon to understand all the factors leading to the recent drop. (The 2009 data, he noted, were preliminary.)

From afar, a dip of just a few percentage points may not seem like a lot. But they are huge for a company such as Destination Maternity, which manufactures and sells clothes and accessories to expectant mothers across the country.

Its sales fell along with the stock market, as sales did at most retailers, and continued to lag even after the recession ended in June 2009. Fewer births, though, are an additional whammy to the company's business model.

The subject came up in Destination Maternity's earnings calls in April and July, even though profitability had improved while sales languished. Each birth represents untold revenue for the chain - much higher than one analyst's estimate of $130 per birth, CEO Krell said, though he would not attach a specific dollar figure.

Before the economy soured, the company had been banking on forecasts by demographers that births would increase just under 1 percent a year, Krell said.

The reasoning: Children of aging Baby Boomers - the Echo Boomers who number in the many tens of millions - would be entering prime childbearing years, he said.

But as the economy began to unravel, Krell said, there was enough evidence from prior recessions that "we knew that that could also lead to a birth decline."

Take 1975. That year, demographers recorded the lowest-ever number of U.S. births, 3.14 million. A 16-month recession ended in March of that same year.

Births increased steadily through about 1982, and did not fall off sharply despite two back-to-back recessions. But they dropped again during the 1991 downturn and again in 2001 and 2002 - during and immediately after an eight-month recession, demographer Sutton said.

"Hard times tend to cause families to have fewer children or to delay having children," said Temple University economics professor William Stull.

Even though humans can be irrational, Stull said, it's common sense to reconsider having children in the depths of a bad economy, when people all around have lost jobs.

And nowadays, people increasingly are deliberate in their efforts to control their fertility.

A big question for Stull isn't when these delayed births will actually occur, but whether, long term, Americans will reverse the trend of declining family size that began decades ago and shows no sign of changing.

In his Center City office, though, Krell is worried about just one thing: making up for lost business, here and now.

Destination Maternity has begun offering "bounceback" coupons (spend $50 today, earn $10 off at a future date) and gifts with purchases (free makeup, a free tote). It also recently eliminated its once-restrictive return policy - you can now return anything within 30 days of purchase.

"Our customers love the change," Krell said. "Maybe the recession and the lower births gave us the extra push."