The Wedding Boom Is Hiding a Troubling Trend for the Economy
By Sabrina Escobar and Teresa Rivas
June 3, 2022, 11:47 am EDT
First comes love, then comes marriage. The baby carriage is a bit of a question mark.
This year will be a banner year for weddings, with some 25% more couples saying “I do” in the U.S. than usual, according to industry estimates. For businesses, the boom is a much-needed second wind after two years of pandemic-related restrictions and delays. Vendors and venues are stretched to capacity, booked out months or even years in advance.
The wedding boom, which began at the end of last year, has fueled hopes that the U.S. could reverse a yearslong trend of falling fertility rates. But fresh data and interviews with demographers show that, once the backlog of ceremonies clears, the surge in trips to the altar is unlikely to lead to more trips to the maternity ward. Indeed, despite a slight uptick in 2021, the birthrate is still hovering close to historic lows, far below what is needed to keep the population from shrinking.
T he factors behind the declining birthrate are complex and multifaceted, including changing views of marriage, growing worries about the future among younger couples, new financial pressures, and increasing acceptance of child-free lifestyles.
But the economic risks are clear. Countries with declining populations skew older and therefore suffer from slower economic growth and strained government budgets. Social safety-net programs such as Social Security and Medicare have to disburse more while relying on a smaller pool of workers to contribute taxes. Fewer babies over time translate into lower consumer spending, the biggest driver of economic growth.
If the working population grows one percentage point slower a year, the country’s gross domestic product could also grow a percentage point slower, says Ronald Lee, demographer and economist at the University of California, Berkeley. Annual GDP growth slowed by 1.2 percentage points from 2010 to 2020 due to population aging, according to preliminary projections from the National Bureau of Economic Research, a nonpartisan research organization. From 2020 to 2030, growth could fall by 0.6 percentage point, the researchers estimate.
[Important graph omitted that shows that “the U.S. total fertility rate hovers at historic lows, far below the level needed to keep the population from shrinking.”]
In some cases around the world, the trend has led to long periods of stagflation—a period when both unemployment and inflation are high, stymieing economic demand. Japan’s so-called lost decades of economic growth were largely driven by sharp declines in fertility rates amid a rapidly aging population. The problem, once it takes hold, can be challenging to reverse. In China, which also is dealing with plunging fertility rates, the government reversed its longstanding one-child policy in 2016 and directly implored families to have more babies. So far, that doesn’t appear to have worked.
The concern over declining fertility rates isn’t a new one. Births have been falling consistently over the past few decades in developed countries globally, but the consequences of an aging population have never been felt as acutely in the U.S. as they are now in the labor market, for example, with the situation poised to worsen.
“We’ve got older workers that if they all start to leave, you’re in even worse trouble with the labor shortage [than] you might see with the pandemic and the Great Resignation,” says Tim Glowa, principal of Human Capital Services for Grant Thornton, a tax and advisory firm.
Jase and Antoinette Browning’s decision to not have children stems from health concerns and apprehension about how a child could affect their lifestyle. Here, with their dogs Casino, River, and Meadow, in their backyard in Wheeling, W.Va. Credit: PHOTOGRAPH BY KRISTIAN THACKER
In the U.S., fertility rates have been falling since the end of the 2008-09 recession, reaching an all-time low of 56 births per 1,000 women in 2020. Five years after the end of World War II, the fertility rate was 106.2 per 1,000 women. And in the 1980s, it oscillated from 65 to 69.
Now, a woman is expected to have 1.66 children over her lifetime. That is a slight increase over the rate in 2020, which was 1.64 per woman. But both rates are far below the so-called replacement-level fertility rate of 2.1 children per woman, which would keep the population at a constant size without accounting for immigration. The baby bump in 2021 was probably not enough to make up for the lost births from the prior two years, says University of Maryland demographer Phillip Cohen.
The U.S. has historically had higher fertility rates than slow-growing nations such as Japan, as well as a steady stream of immigration patterns that have offset most of the negative impacts from declining population growth. But during the pandemic, immigration into the U.S. came to a near halt, laying bare the shrinking population, says Diane Swonk, chief economist at Grant Thornton.
“We’re in a situation now where it gets harder and harder to catch up, given the deficit we’re in,” she says.
Uncertainty seems to be playing a big role in keeping couples from having children, Cohen adds: People are reluctant to make long-term commitments when they feel the future is too unpredictable. The pandemic heightened that sense of uncertainty, on top of other factors like recession fears, surging inflation, climate change, and political instability.
Antoinette Browning, 30, has long known she doesn’t want biological children. With a family history of pregnancy complications, and her small physique at 5 ft. tall, she is scared that pregnancy could be dangerous for her. When she met her husband, Jase, 31, she was pleasantly surprised that he was happy with not having children—a decision he started pondering since joining the military in his 20s.
The Brownings’ decision to be child-free goes beyond the risks associated with pregnancy. Like many other couples, it’s also about how having a child could affect their lifestyle and, conversely, how their lifestyles and personalities would affect a child.
“Everyone’s like, ‘You’d be a great mom,’ and it’s like, ‘We don’t know that,’ ” says Antoinette Browning. “You can hope, you can honestly believe that I would, but we don’t know, and I’m not willing to take the chance.”
The wedding boom, which for now has significantly driven up prices in the business, may not be a symptom of a higher marriage rate in the U.S., but rather of delayed ceremonies that couldn’t take place during the height of the pandemic.
Maria Vennikov, 24, and Max Dodge, 25, started dating in 2018. By the end of 2020, they had moved into an apartment in Richmond, Va., with an eye to tying the knot. But the couple didn’t get engaged until this past February—nearly two years and a pandemic later.
Maria Vennikov and Max Dodge look through a wedding magazine in their Richmond, Va., apartment as they prepare for their October wedding. Credit: PHOTOGRAPH BY KYNA UWAEME
“We wanted to wait until we had a little bit more money and until Covid was over so that we could have a wedding that we wanted and not fit to the Covid standards,” Vennikov says.
Vennikov and Dodge are now planning a 100-person wedding in October, racing to secure vendors before they hike their prices. Already, Vennikov calculates that their wedding budget has crept up from an estimated $20,000 to just under $35,000.
Half of the couples who were hoping for a 2020 wedding postponed their nuptials until 2021 or even 2022 due to the pandemic. That brings the total number of weddings scheduled this year in the U.S. up to a whopping 2.6 million, estimates Lauren Goodson, senior director of insights at wedding planning website The Knot. That is up from 1.9 million in 2021, and about 2.1 million in any given year on average, according to industry trade group the Wedding Report. But heading into 2023 and beyond, industry experts anticipate those numbers trending down to prepandemic levels.
In 2020, the marriage rate hit a historic low of 5.1 marriages per 1,000 people, down from 6.1 in 2019, according to the Centers for Disease Control and Prevention. The 2019 marriage rate was a far cry from the rate in 2000—8.2 marriages per 1,000 people—and even further away from its peak in 1946, when it reached 16.4.
Marriage in the U.S. is optional now in a way it wasn’t before, says University of Maryland’s Cohen. The number of unmarried couples living together has surged in recent years, and in many ways that’s good—see the falling divorce rates. Yet for demographers studying population change, marriage trends are key because people are more likely to have a child after they get married, says Lyman Stone, a research fellow at the Institute for Family Studies.
“We knew that we wanted to be married before we had kids,” says Vennikov. She and Dodge, both only children, are hoping to have more than one child within a few years of getting married.
There are a host of practical factors keeping a lid on marriage and fertility rates. Experts estimate that it costs nearly a quarter of a million dollars to raise a child to adulthood in the U.S., excluding college, a daunting figure for those among the 64% of Americans living paycheck to paycheck. Even wealthier people may be intimidated by the fact that the U.S., unlike other developed nations, does little to offset the costs of daycare and doesn’t legally require employers to provide any paid parental leave.
Maria Vennikov selects dresses to try on at Blue Sage Bridal in Richmond, Va. Credit: PHOTOGRAPH BY KYNA UWAEME
That presents a Catch-22, as taking time off for child rearing can put career trajectories at risk, a major fear for the increasing number of college-educated women who delay childbearing until they feel more established. Researchers have associated later childbearing with having fewer kids in the long run, as well as increasing health risks for women and babies.
That is a concern for Tiarra, 23, and Jonathan, 32, a recently engaged couple living in California, where Tiarra is wrapping up her third year of law school.
“As a woman who is going to work in law and be a lawyer, I know that having a kid will affect my career,” says Tiarra. “It isn’t a question of ‘Will it?’ It’s just, ‘How much?’ ”
Tiarra, who requested her surname be withheld, doesn’t think they’ll try to have their first child for at least six more years. Even then, they’re still not sure if they’d aim for a second. Whether they have more than one child depends on several factors, from their financial situation at the time to their future employers’ remote-work and parental-leave policies, she says.
Catching up on the birthrate, let alone reversing its decline, could take a while. Legislators first need to agree on a course of action, and even then, successful policies short of drastically increasing immigration will take years to play out. The U.S. already offers some help to couples getting married and having kids: think child tax credits, the elimination of the marriage penalty that caused some couples to pay more tax jointly than they would have as single filers, and tax-advantaged strategies for couples saving for their children’s educations.
Yet these programs still fall well short of the support that other developed nations offer. On the federal level, the government doesn’t offer any tax assistance or direct help to deal with the shock of child care in the first few years after having a baby, which can be as pricey as a mortgage payment or college tuition. Daycare for an infant easily exceeds $20,000 annually in many high cost-of-living areas, declining only slightly for the toddler years.
“We don’t have a lot of social safety nets that work for people,” says Joy Malonza, a 25-year-old TikTok influencer who posts frequent videos exploring her views on being child-free to her nearly 50,000 followers. Improving access to health and reproductive care, providing monetary assistance to new parents, and tackling climate change would be ways to enhance those social safety nets, she says.
Given political gridlock and the broad opposition among Republicans and some Democrats to launch new big government programs amid high inflation, it seems unlikely that these measures will pass soon.
It could be a moot point, as it’s unclear how effective these programs have been in other developed countries. Many nations across Europe and Asia have tried for decades to turn around declining fertility rates, with varying degrees of success. South Korea has spent billions of dollars in cash subsidies and maternal support, and yet births reached historic lows in 2021. In contrast, the pandemic ushered in the first year of rising birthrates in Norway in about a decade, as young couples felt high degrees of confidence in social safety nets, according to Nordic research institute Nordregio.
The challenge for investors is how to position themselves amid these long-term trends—especially since an array of sectors are affected by this demographic shift. It may make sense to focus on companies that could benefit no matter how these trends shake out.
Nordstrom (ticker: JWN) specializes in special-occasion wear and accessories, which should see a return to more normalized demand after the pandemic—whether for weddings or other social events that were put on hold. The department store was one of Barron’s top 10 stock picks for the year, and that bullishness has been borne out, not only by a strong holiday season, but also by the company’s most recent earnings results.
Nordstrom noted that it is seeing strong demand for fancier goods, and lifted its full-year forecast. The department store could get a boost from wedding guests’ spending, but it also expects momentum to continue after the summer rush. At about eight times forward earnings, it looks cheaper than many items on couples’ registries.
As Barron’s previously noted, skyrocketing housing costs have forced many younger would-be home buyers to simply give up. That means people might be renting for longer, whether they are saving for a home in the suburbs or a small condo in the city.
“We did not want to be in an apartment, but it was our only option,” says Destiny Pacella, a 26-year-old who recently signed her first lease on a joint apartment with her fiancé, Nicholas Driscoll. The couple wanted to buy a house, but rising costs drove them toward renting a newly renovated apartment in downtown Richmond, Va.
Destiny Pacella, 26, recently signed her first lease on a joint apartment with her fiancé, Nicholas Driscoll. Here, they enjoy time at Yorktown Beach, Va., where Nick asked for Destiny to be his girlfriend. Credit: PHOTOGRAPH BY KYNA UWAEME
Apartment real estate investment trusts, or REITs, seem poised to benefit in the near term, notes Nick Giacoumakis, president of NEIRG Wealth Management. Apartment REITs have historically done well in overheated housing markets, and home costs have “simply gone into the stratosphere” lately, he says.
AvalonBay Communities (AVB) and Equity Residential (EQR) are in his firm’s portfolio. Both trade around 21 times price to funds from operations, in line with their long-term averages, with generous dividend yields above 3%.
Target (TGT) is one of Smead Capital Management’s Chief Investment Officer Bill Smead’s picks. “The big difference between this group of new moms and prior generations is that this will be dominated by college-educated females, which means higher-income parents who waited longer, and higher-net-worth grandparents,” he says.
Moreover, Target skews toward better-heeled consumers, whether they’re new parents buying baby goods or child-free splurging shoppers. At less than 14 times forward earnings, Target is also trading well below its five-year average after a recent selloff—a good entry point for longer-term shareholders.
Despite the wedding boom, the business of marriages and having babies isn’t an easy one for amateur investors. And given the market’s performance this year, long wakeful nights are one thing that investors probably have in common with new parents. Keeping an eye on trends and buying long-term winners is one way to help them sleep like a baby.
Write to Sabrina Escobar at sabrina.escobar@barrons.com and Teresa Rivas at teresa.rivas@barrons.com
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