And finally…birth rate drops predict recessions better than experts

A new study published by the National Bureau of Economic Research has identified an historical correlation between a drop in fertility to economic slowdown, which is more consistently correct than other indicators such as consumer confidence or purchases of big-ticket items such as cars and white goods.

While previous research has shown that birth rates track economic cycles, the study is the first to show that falling fertility is an indicator for recession.

Researchers at the NBER analysed more than 100 million births over almost 20 years and discovered that about six months before each of the past three recessions in America, the number of pregnancies started falling.

For example, the year-on-year conception rate increased over the first half of 2006 but started falling sharply before the end of that year while stock markets were hitting all-time highs. A little more than six months later the economy had slipped into recession as the financial crisis struck.

A similar pattern was identified before the recessions of the early 2000s and early 1990s.

“One way to think about this is that the decision to have a child often reflects one’s level of optimism about the future,” said Kasey Buckles, a professor at the University of Notre Dame in Indiana and co-author of the study.

However, the study’s authors did point out that the correlation between conception and recession is far from perfect, as he study identified several periods when conceptions fell but the economy did not.

“It might be difficult in practice to determine whether a one-quarter drop in conceptions is really signalling a future downturn. However, this is also an issue with many commonly used economic indicators,” Professor Buckles told the Financial Times.