The September 2024 edition of Sara’s Sunshine Corner is illuminated by the super harvest moon with a partial lunar eclipse.
Twenty-Five Basis Points
In the prior Sunshine Corner, I noted that signs of weakness in the labor market would lead the Federal Reserve to cut rates in September. Another month of data shows a continuation of this trend.
At 4.2% in August, the unemployment rate remains historically low but has risen enough over the past year to trigger the Sahm Rule recession indicator. The U.S. economy is still adding jobs but this summer’s pace of 116,000 new jobs per month is a marked slowdown from 211,000 jobs per month in the summer of 2023.
Inflation has been tamed. Annual personal consumption expenditure (PCE) inflation has been below 2.5% since January 2024 with core PCE inflation below this level since May. As of July 2024, annual PCE inflation was 2.3% with core PCE inflation at 2.4%.
To ensure a soft-landing in the labor market, the Fed is widely anticipated to reduce the federal funds rate tomorrow. SRR Consulting expects a 25-basis point cut. The Fed is likely to remain cautious in its pivot to easing interest rate policy while the unemployment rate is still relatively low, and its preferred inflation measure is hovering just over its 2% target.
Healthcare Criminalization
I would prefer not to write this next section, but it is time. It is time because there is enough data to witness a deviation from historical patterns. I would also prefer that healthcare not be criminalized in twenty-two U.S. states.
But here we are, so let’s get into it.
U.S. Family Planning Freedom, 1965-2022
Before 1965, Americans did not have a defined right to privacy nor protected access to reproductive healthcare. Three Supreme Court (SCOTUS) rulings changed everything for American families:
Griswold v. Connecticut. In a 7-2 decision, SCOTUS ruled in June 1965 that “marital privacy” was a fundamental constitutional right, striking down Connecticut’s state law against contraception. The ruling allowed married women to access contraception with their husband’s consent.
Eisenstadt v. Baird. In a 6-1 decision, SCOTUS ruled in March 1972 that the Equal Protection Clause of the Constitution’s Fourteenth Amendment prevented discrimination in the provision of contraception. The ruling allowed all Americans to access contraception.
Roe v. Wade. In a 7-2 decision, SCOTUS ruled in January 1973 to strike down the Texas law criminalizing abortion and reinforce a Constitutional right to privacy as applying to individuals in addition to married couples. This ruling, plus the prior rulings on contraception access, provided Americans the freedom to make their own family planning decisions.
In June 1965, the labor force1 participation rate for Americans aged 25-54 years2 was 70%, reflecting a 97% participation rate for men and 46% for women. Only 46% of women aged 25-54 years were employed or unemployed and looking for work when contraception and abortion were criminal acts, while almost every American man was able to participate in the labor force.
Between 1965 and 2022, women’s prime-age labor force participation rate increased from only 46% to 78% and the total labor force participation rate rose from 70% to 82%.
By 2022, there were 46 million women over 25 years old in the labor force with a college degree, compared to 40 million men.
Career and family planning decisions are linked. One cannot plan their education and career without the bodily autonomy afforded by access to reproductive healthcare. The legalization of reproductive healthcare enabled an historic wave of women joining the workforce.
The 6-3 decision by SCOTUS in the Dobbs v. Jackson Women’s Health Organization case ended these protections at a federal level on June 24, 2022.
Laboratory of the States
The end of federal protections created a new landscape of reproductive healthcare access that varies widely across states.
As of September 10, 2024, abortion is banned entirely or with gestational limits unrelated to fetal viability in twenty-two states. Seventeen states have acted to protect all reproductive rights and, in eleven states plus Washington D.C., care is legal but restricted via bans on insurance coverage.
Gen-X was the first to spend their entire adulthood with these protections and Gen-Z will be the first to come of age without these protections. Their choices for attending college, accepting a job, and starting a family (or not) will occur against an entirely different legal ecosystem than their parents and grandparents. Sterilization procedure rates, for example, have increased sharply for those aged 18 to 30 years in banned states.
One year of population data is available for post-Dobbs America, which is not enough to identify a trend. It is, however, enough to show a change.
Banned states, which include the Sunbelt, experienced a negative shift in the direction of migration from other states, while protected and restricted states experienced a positive shift. The magnitude of these changes is unusual, particularly for Florida, New York, and Illinois.
Domestic migration into Florida (banned) peaked in the year ending July 2022. In the following year, ending in July 2023, the change in domestic migration was equal to the impact of the Great Financial Crisis in 2007. New York and Illinois, on the other hand, each protected state experienced the largest positive shift in annual domestic migration in twenty years between July 2022 and July 2023.
Is this shift significant? SRR Consulting will continue to track these changes over time to learn more.
More Data, Please
Residential market data offers another way to examine individual and family shifts in post-Dobbs America with a longer time series. Two years of data is more than one, even though it pales in comparison to the prior fifty years. Let’s dig in.
Starting with apartment vacancy rates, we find an obvious issue — it is easier to build in banned states, like Texas and Florida, than in protected states, like California. The pre- and post-Dobbs vacancy rates across protected, restricted, and banned states don’t show an unexpected trend.
What about apartment rents?
Apartment rents spiked due to pandemic effects and have drifted down across the country. Annual apartment rents in banned states began to decline in July 2023 and have not been positive since. Protected and restricted state rents have continued to grow at a modest pace.
Apartment rents and vacancy rates are helpful to understand market trends, but neither measure is normalized for individual market trends in supply and demand. Zoning laws, rent control, and building requirements all play a role in housing market conditions and each state and local government manages them differently.
To normalize these differences across states, SRR Consulting turned to Redfin’s months of supply data.
“Months of supply” is a measure that shows the availability of housing units relative to what the market absorbs (i.e., leases or sells) in an average month. In August 2024, my home state of Illinois had 2.1 months of housing supply on the market, while Texas (where I was born) had 4.1 months of supply.
When grouping states by access to reproductive healthcare, the long-term trend in months of supply flips. Protected states historically have more supply available relative to demand. This illustrates the long-term trend of domestic migration toward the Sunbelt.
Post-Dobbs America looks different. Not only are banned states newly oversupplied with housing relative to protected states, but that gap is widening.
The national housing market faces an affordability crisis with too little supply in most markets. This backdrop makes the chart above even more interesting. Banned states are experiencing a new dynamic in the supply-demand balance of housing relative to protected states.
Will it continue? Will it reverse? Watching the data will answer these questions.
Other opportunities to change these dynamics lie with voters. Five states with bans — Arizona, Florida, Missouri, Nebraska, and South Dakota — have reproductive rights on the ballot in November. In every state ballot initiative since Dobbs, family planning freedom wins and bans are defeated.
Voters across the country also have an opportunity to support family planning freedom by choosing the candidate willing to restore federal reproductive healthcare protections.
I would prefer not to track the impacts of family planning prohibition for another two years, or more.
I would prefer my son’s generation to have the same freedom to plan their lives as I did, but here we are.
“Labor force” is shortened language for the civilian noninstitutionalized labor force. This population excludes people in the military, prison/correctional institutions, and residential medical facilities, such as skilled nursing homes.
Economists refer to people 25 to 54 years old as “prime age” with respect to the labor force because this adult population cohort reflects the post-college to peak-earning years of an individual’s career.