The Census Bureau reported last week that the financial crisis, aside from wrecking the economy, also helped drive down U.S. fertility rates to levels not seen since the late 1990s. The number of births for every 1,000 women aged 15 to 44 has dropped, to 62.7 in 2013 from 69.3 in 2007.

No shock there. Historical demographers have long recognized that when it comes to fertility, recessions are the equivalent of a cold shower.

The best evidence for this comes from the mother of all financial crises: the Great Depression. One of the first studies to demonstrate the connection was the so-called “Indianapolis Study,” published in 1953. The researchers found that factory activity, which dipped in the 1930s, correlated with fertility levels during the interwar period.

Subsequent research corroborated the notion that the Great Depression prompted many couples to postpone pregnancy, or limit the size of their families. A study by S. Philip Morgan showed that women born between 1900 and 1910, who were at peak childbearing age during the Great Depression, were more likely to have no children than those born before or after that period.

While other economic downturns led to fleeting declines in fertility, few can match the Great Depression, and to a lesser extent, our latest recession. But it’s not the high levels of unemployment that explain the drop in fertility, as the demographers Tomas Sobotka, Vegard Skirbekk and Dimiter Philipov pointed out in an article in Population and Development Review.

Instead, it’s the “unexpected” and abrupt deterioration in economic conditions that is most decisive. As the authors noted, “the available evidence indicates that a change in unemployment or in consumer confidence matters more for fertility changes than the levels of those indicators.”

Thus, when unemployment in the U.S. went from about 3 percent in 1929 to almost 25 percent a few years later, the resulting uncertainty made parents wary of expanding their families. The protracted nature of the economic shock made matters worse.

But there’s good news from the Great Depression, too. A study by economists Price Fishback, Michael Haines and Shawn Kantor studied relief spending in about 114 U.S. cities from 1929 to 1940. They found that the creation of a social safety net made a significant contribution to the “leveling off of the fertility rate in the late 1930s.”

Recent history provides additional evidence that government policies can halt, if not reverse, declines in fertility linked to a weak economy. For example, Finland suffered a serious financial crisis in the early 1990s, though fertility rates increased, thanks to government allowances for parents who stayed home with children under the age of three. More recently, Iceland’s generous parental-leave policies contributed to an uptick in birthrates despite huge damage during the financial crisis.

Austerity policies that require governments to shred the social safety net to satisfy bondholders are toxic, however.

Such was the case with Latvia, which often is held up as a poster child for the restorative effects of austerity. As the Baltic nation undertook spending cuts from 2008 to 2010, its fertility rate dropped almost 20 percent, from 1.44 children per woman to 1.16. Early reports from Greece and other countries that have adopted such measures are equally troubling.

Indeed, the demographic decline caused by the recession in the U.S. will probably appear minimal compared to the slow-motion train wreck taking place in Europe. As Bloomberg View columnist Megan McArdle and others have argued, well before the crisis, many European nations faced long-term economic stagnation on account of declining birthrates. In countries such as Italy, fertility rates had fallen well below what was needed to keep the population steady, never mind prevent the rise of stagnant societies dominated by retirees and pensioners.

And since 2009, youth unemployment levels have spiked to more than 40 percent in Portugal and Italy, more than 50 percent in Spain, and almost 60 percent in Greece. This collapse in employment among Europe’s youngest, most fertile adults bodes ill for the long-term prospects of these countries. Even under the best of circumstances it will take years to reduce unemployment and boost fertility.

But the euro area doesn’t have that kind of time. Simply put, its biological clock is ticking.

By Stephen Mihm

Stephen Mihm, an associate professor of history at the University of Georgia, is a contributor to the Bloomberg Ticker. ― Ed.

(Bloomberg)