Wednesday Briefs – 28 July 2021

THIS WEEK: Mini Baby Boom; Unmeasured Inflation; Hotel Rebound.


In the Briefs of 10 February and of 28 April 2021, we projected that the decline in births during the pandemic could be followed by an offsetting mini baby boom after the pandemic, in particular as household bank accounts have been padded by several rounds of government checks. There is early evidence that this scenario is now unfolding.

The Institute for Family Studies (IFS) headlines that “births are back” and explains that:

“Academic research has found that switches to remote work led to higher fertility… [and] that child benefits (like the new expanded Child Tax Credit) and direct cash transfers (like the stimulus payments) boost fertility, if they’re big enough. Nor is this the first time that recession-fighting measures might have boosted births: when the UK arbitrarily slashed monthly mortgage payments for some families during the 2008 recession, those families’ fertility rates jumped upwards despite the ongoing recession. [In the present case], the financial transfers provided to families really were enormous, plenty large enough to matter.”

IFS Chart: Note the increases vs. 2019 in New Hampshire, Colorado, Connecticut, Hawaii etc.

In other words, the combination of work-from-home and government stimulus has encouraged couples to have children.

The CDC natality numbers that are available through March 2021 do show a recovery. More recently, several states have released data (chart) that show births to have recovered, or in some cases to have exceeded, their comparable levels of 2019. On the theory that there were deferred births during the pandemic, nationwide births in 2021 would have to exceed the 2019 total by 300,000 – 500,000 births (and the 2020 total by 600,000 to 1 million) in order to offset the decline seen in 2020.

The general US demographic trajectory remains one of falling population growth. If the surge of 2021 sustains itself for several years, there may be a longer-term reversal of this general trend.


The current spike in inflation is said to be transitory and confined to some sub-sectors of the economy such as used and new cars or lumber or… It is also said however that the Fed’s willingness to be wrong is not symmetrical, meaning that it prefers the risk of being too lax for too long to the risk of tightening too early, at a time when the economy is still convalescing. The latter risk seems remote for now. With 10-year yields below 1.3%, conditions remain extremely lax.

The shock of discovering that this inflation is not transitory would be painful. Treasuries would sell off hard, dragging stocks down with them. Frothy sectors such as technology would be hit hard, but so would cyclicals and industrials in the initial downdraft. In the second stage, reopening plays would outperform again if inflation seems containable and the economy continues to grow.

For now rising prices are found in many places and manifest themselves in ways that are not captured in the official figures. Anecdotally, here are a few:

  • a day camp that charges the same weekly price as in 2019 but for four days (no camp on Friday) instead of five.
  • a two to three week wait (due to staff shortage) for a service that was available in 2019 in less than three days.
  • Walmart’s offer to pay the college tuitions and books of its associates/employees.
  • Uber’s surprising new high prices.

It is possible that a return to normality will ease staff shortages and supply bottlenecks but we will still be left with plenty of capital in the system looking for more forms of consumption and more investable assets.


Surviving a downturn in business can be hugely beneficial. After the weaker players leave the scene, the survivors can enjoy the recovery with fewer competitors and therefore greater pricing power and higher market share. This seems to be happening now in the hotel industry, not everywhere but at some destinations inside the United States.

In such places, surviving hotels have been able to raise prices because foreign competition for the traveler’s dollar has greatly diminished due to the pandemic, and because domestic competition has been reduced by many hotels shuttering their doors for good.

A measure of hotel performance is the TRI RevPAR or Total Room Inventory Revenue Per Available Room. According to research and data firm STR, the RevPAR in several cities now exceeds the comparable period in 2019. STR notes in this 10 July report:

“On a 28-day moving average, which smooths out holiday shifts, 52% (87) of markets were well past their 2019 levels, which we categorize as being at “Peak” (TRI RevPAR indexed to 2019 greater than 100). The percentage of markets at “Peak” is the highest we have seen since we began the Market Recovery Monitor. Another 31% of markets (51) were in “Recovery” (TRI RevPAR indexed to 2019 between 80 and 100). Five markets (San Francisco, New York, San Jose, Boston, and Washington, DC) remained in “Depression” (TRI RevPAR indexed to 2019 below 50) with 14% (23) in “Recession” (TRI RevPAR indexed to 2019 between 50 and 80). TRI RevPAR in San Francisco was only 39% of what it was two years ago.

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Update: Working Age Population Around the World 1960-2050

This is an update of a similar post from 2015. The UN projections have changed but only by small numbers. The main observations are the same as six years ago (click table to enlarge in a new tab).

The working age population (WAP, those aged 15 to 64) of sub-Saharan Africa continues to grow rapidly. It has more than doubled since 1990 from 252 million to 609 million, and is expected to more than double again by 2050 to 1.3 billion. If the reality turns out to be anywhere near these projections, it will be a significant challenge for African economies to absorb and to employ productively this enormous amount of new human energy.

India faces a similar challenge with its WAP growing from 928 million now to 1.1 billion in 2050. Though daunting, this represents a slowdown in the rate of growth from the previous thirty-year span 1990-2020.

The WAP of Europe, China and Japan have already peaked and will be declining for the rest of the century, per UN projections. Europe’s decline from near 500 million in 2005 to a projected 407 million by 2050 is mainly due to eastern and southern Europe. The WAP of France and the United Kingdom will flatline to 2050 while those of Germany and Russia decline.

In the United States, the steady growth in the WAP between 1960 and 2005 combined with a falling dependency ratio to fuel strong economic conditions. Growth in the WAP is expected to be more muted in the decades ahead.

Compared to the late 20th century and the first decades of this century, the future growth in the WAP will taper off or even turn negative in several regions and countries. Sub-Saharan Africa stands out as the exception that will maintain strong WAP momentum through at least 2050.

Lebanon in Crisis, with Joe Issa El Khoury

“Historically, Lebanon prospered as a result of inflows of people and funds – people who came to take refuge in Lebanon and also funds. If we look at the post World War 2 period when modern Lebanon became independent and also at previous periods that Lebanon went through – and I mean over the past 100 or 200 years – one thing that was common to all these eras is its liberal economic system that was adopted by all who lived on this land. The constant was the liberal economic system.”____ Joe Issa El Khoury

Sami J. Karam speaks with Joe Issa El Khoury, a Beirut-based financier, about the tragic events that have unfolded in Lebanon since 2019. A sharp fall in the currency, a banking freeze, a political crisis, hyperinflation, and widespread street protests made 2019 a difficult year. But these events were then compounded by the Covid-19 pandemic and the explosion in the port of Beirut in 2020.

Issa El Khoury explains the sequence of events that led to the present, and offers a possible way forward.

Topics include:

  • 0:00 Introduction of Joe Issa El Khoury
  • 2:25 What is it like right now on the ground in Beirut?
  • 8:33 Why did Lebanon have a golden period in 1945-75; why was it later so prone to crisis?
  • 17:40 The Rafik Hariri era and the return of growth 1990-2005
  • 20:00 What explains the weakness of the Lebanese state: geography and demographics
  • 26:30 Lebanon’s diversity as a source of wealth; Example of Lebanese cuisine
  • 30:40 Crossing the line from a laissez-faire economy to a crony economy
  • 35:05 The real estate boom of 2007-11
  • 36:55 The impact of the Syrian civil war
  • 39:10 Crowding out the private sector
  • 44:10 The proximate factors that led to the meltdown
  • 46:15 The current condition of the banking sector; Role of the Central Bank
  • 51:00 Will depositors suffer a haircut? The Lazard and other plans
  • 54:45 Talk of privatization of state assets
  • 59:45 Political patronage in the public sector
  • 1:01:50 “All roads lead to Washington DC and the acronym IMF”
  • 1:05:20 Political reform and the role of the diaspora