The Baby Business Will Take The Next Big Hit From COVID-19

When the pandemic first hit and shelter-in-place requirements went into effect across virtually the entire nation, many people, only half-jokingly, said nine months later the country would likely see a big spike in the birth rate.

But it turns out that nobody is laughing anymore: the reality is that the number of babies likely to be born in the last quarter of 2020 and perhaps well into the years after is going to be dramatically less.

And coming on top of a historic drop in the overall birth rate over the past decade, this spells serious business consequences for a wide range of industries, from diapers to preschools and from Sesame Street to McDonald’s.

In a new report from the Brookings Institution as reported by the Washington Post, economists are forecasting that the country could see “on the order of 300,000 to 500,000 fewer births next year due to the pandemic recession.” At the high rate it represents close to 14% fewer births in the country compared to last year.

Using historical patterns both from the Great Recession that started in 2008 and, going back a century, the 1918 flu pandemic, they forecast a significant decline in people having children, largely due to the costs and the psychological economic malaise people are suffering through right now.

And these will not be made up at a later date either. “We expect that many of these births will not just be delayed – but will never happen,” the economists wrote in the report. Any delayed recovery in the overall economy will only continue the pattern into subsequent years, they said.

The intangible losses are incalculable, but the economic cost could be as high as $5 trillion over the coming decades using a forecasting tool called the “value of a statistical life.”

This grim forecast comes on top of a birth rate that has already been at historical lows starting with the 2008-2009 recession and never really recovering. In 2019, about 3.75 million babies were born in the U.S., down 1% from the year before but dramatically lower than the peak Baby Boom years when more than 4.3 million babies were born. As a percentage of the child-bearing population, the decline is even more precipitous.

What’s more the fertility rate is already below the replacement rate for the country, at its lowest rate since the government began tracking it in 1909. That is further exacerbated by Trump administration policies to restrict immigration, a way the country has historically added to its population.

Beyond the obvious impact on the size of the workforce in years to come, smaller population growth will also impact programs like Medicare and Society Security that are based on enough new workers coming along to support older and retired citizens.

And then there are the business sectors that will simply have fewer customers to sell to. Initially it will be baby products like diapers, formula, infant and children’s clothing, toys and juvenile products like cribs and strollers. But as this smaller demographic group moves through the age cycles, it will continue to cause problems for schools, athletic programs and all kinds of businesses that depend on children to drive sales, from McDonald’s Happy Meals to video games. And the pattern will continue throughout the lifetimes of these smaller population groups, grimly, all the way to nursing homes and funeral parlors.

Even as some sectors of the overall economy, from retail sales to employment numbers to the housing market, start to recover this looming baby bust may be the longest lasting effect of this pandemic.