This blog is intended to go along with Population: An Introduction to Concepts and Issues, by John R. Weeks, published by Cengage Learning. The latest edition is the 12th (it came out in 2015), but this blog is meant to complement any edition of the book by showing the way in which demographic issues are regularly in the news.

If you are a user of my textbook and would like to suggest a blog post idea, please email me at: john.weeks@sdsu.edu

Monday, October 18, 2010

Buy in the Bust, Sell in the Boom

The Economist noted in this week's issue that a private equity firm is going to purchase the Gymboree Corporation for $1.8 billion. If you have kids, you know about Gymboree, which sells children's clothes and operates centers where "where children can play noisy games on brightly coloured soft mats." Why would someone want to buy a business oriented toward children when the birth rate in America is so low? The answer comes from Peter Francese, former founder and publisher of American Demographics magazine (now folded into Advertising Age magazine), who is currently an independent consultant doing work for the advertising agency of Ogilvy & Mather (a firm that could have been a model for the highly popular "Mad Men" series).

The birth rate in America has dipped to its lowest point in at least a century. Young couples are putting off having babies because they doubt they can afford it.
But the chances are that they still want children. Once the economy improves, the people who put off parenthood will get down to it. Mr Francese projects that in 2014 there will be 4.4m births, a record high. “That’s a lot of demand for Gymboree’s products,” he says. What’s more, the women who give birth to these post-recession babies will be better educated than any previous generation of mothers, and slightly older too. Many will earn enough to splurge on pricey accoutrements for their offspring.
And don’t forget the grandparents. America’s overall population is expected to grow by less than 1% a year for the next few years, but the number of people aged 65 to 74 will grow at a rate of 5%. Boomer grandparents will spoil their children’s children as eagerly as they once spoiled themselves.
This is exactly what is meant by the saying that “demography plays” on Wall Street.
 

1 comment:

  1. Most of my peer-group is in this boat, and they are postponing pregnancy in hopes of better economic times. On the other hand, my wife and I are of the mindset that there is no "perfect time" to have a child, and that you have to "just do it." As parents, we have to verbal threaten our son's loving grandparents with things like revoking visitation privileges because they are all so eager to spoil him rotten. Boxes would randomly show up, courtesy of UPS, which were filled with all kinds of over-priced, "latest-and-greatest," "doctor-approved-clinically-researched," gadgets and gizmos.

    One thing this article doesn't discuss but could be speculated is this: since the average age of these first-time parents is going to be older than what is has been in the past, not only will these parents be better educated and better paid, but it is also likely that they will succumb to fatigue quicker. This would also make a Gymborie-type play environment more appealing since the kids would require less direct supervision. At 30+ years of age, neither my wife nor myself have the same energy level as our 20-something counterparts, and we are constantly being put through the ringer by our almost-two-year-old.

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