Posts tagged Recession
The National Bureau of Economic Research (NBER) published a report early this week demonstrating a correlation between national conception rates and economic recessions. According to the report, pregnancy rates have dropped prior to economic downturns several times over the last few decades, indicating that they can predict the economic trajectory.
The report calls the findings a “new business cycle fact”, stating that the “the growth rate of conceptions declines prior to economic downturns and the decline occurs several quarters before recessions begin.”
“Our findings suggest that fertility behavior is more forward-looking and sensitive to changes in short-run expectations about the economy than previously thought,” the report explains. “The (2008) recession began in December, as later determined by the NBER, and by this time conceptions had already been in decline for months,” the report said. It adds that all normal economic indicators were positive in 2007. Consumer confidence was high and the stock market was strong, too.
Conception growth rates changes before the collapse of Bear Stearns and Lehman Brothers, as well.
“Bear Stearns did not collapse until the end of the spring of 2008. Several months later, in September of 2008, Lehman Brothers collapsed, an event sometimes considered a catalyst in the great recession,” the economists noted. However, conception rates in the first three quarters of 2008 were already 100,000 lower than those of 2006, and falling.
“Once you examine monthly or quarterly data, the pattern becomes obvious,” said one of the study’s authors Daniel Hungerman. “We show the existence and magnitude of this pattern before the Great Recession, and it’s striking since that recession was famously hard to predict. None of the experts saw it coming,” he said, “And in its first few months, many business leaders were convinced the economy was doing OK — even as the number of conceptions plummeted and had been falling for a while.”
According to the report’s data, conception rates predict upcoming downturns more accurately- and earlier- than GDP growth rates.
Brown Advisory’s head of investments Paul Chew recently rocked the financial boat by saying that the EU crisis will have a very minor impact on American businesses this year. He explained that the rising market demand for United States exports will balance any small decrease in European demand.
“A European recession would clearly hurt U.S. exports to Europe, but the U.S. economy us not overly exposed as the EU only represents approximately 20% of the total U.S. export market,” Chew said.
He went on to explain that S&P 500 gains are currently increasing beyond historical averages, in comparison to the more sluggish GDP. The earnings are also reducing new hires and preserving tight cost restraints. GDP has jumped a mere 1.4%, while S&P 500 earnings have reached 15%.
Last year’s trends, namely volatility and thematic investing, do not interest Chew as much for the upcoming year, as he sees equity valuations as “relatively compelling.”
In the month of October, the U.S. economy added 80,000 jobs, and unemployment rates fell slightly, from 9.1% to 9.0%, revealing that while the going is slow, the world’s greatest economy is on a stable path to recovery.
Furthermore, the economy did not falter in the face of August’s incidents, including the downgrade to the US credit rating and the EU debt crisis. Still, the pace of recovery remains slow.
The revisions of the past few months reveal the risk of depending on the initial employment data.
“You want to see revisions to the upside if one expects firming labor conditions. Weaker labor markets normally create downward revisions. The trend is moving in the right direction,” said Eric Green of TD Securities in New York.