February 24

Worsening divorce rate points to improving economic outlook

Whatever the social and emotional impact, divorce is contributing to the formation of new households and boosting demand for housing, appliances and furnishings. Divorces are also prompting more women to enter the labor force.

By Steve Matthews
Bloomberg News

ATLANTA — Hard economic times had kept Amy Derose and her husband Lawrence locked in an unhappy marriage for the sake of their engineering firm in Pompano Beach, Fla.

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While an improving economy may be allowing more divorces, there can be high costs – both emotional and financial – for those involved, especially women.

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“The business was hanging on by a thread and we had to hang on,” said Derose, 53, who had been married 35 years and worked as the business manager. “We couldn’t afford to split. He needed me in the business and I needed him.”

With Florida’s economy and housing market recovering, “we are definitely on the upswing” and revenue is rising at their 24-employee company. That is allowing the couple to move forward with their divorce this month after years of showing up to work as if nothing were wrong personally. Now, she is looking for a job and “couldn’t be happier.”

The number of Americans getting divorced rose for the third year in a row to about 2.4 million in 2012, after plunging in the 18-month recession ended June 2009, according to Census Bureau data. Whatever the social and emotional impact, the broad economic effects of the increase are clear: It is contributing to the formation of new households, boosting demand for housing, appliances and furnishings and spurring the economy. Divorces are also prompting more women to enter the labor force.

“As the economy normalizes, so too do family dynamics,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pa. “Birth rates and divorce rates are rising. We may even see them rise strongly in the next couple of years, as households who put off these life-changing events decide to act.”

Divorces were at a 40-year low in 2009, according to Jessamyn Schaller, an economics professor at the University of Arizona, citing data from the federal government’s National Center for Health Statistics. The divorce rate more than doubled between 1940 and 1981 before falling a third by 2009, according to figures from NCHS, based in Hyattsville, Md.

The rise in divorces has coincided with an increase in household formation. Almost 5.3 million households have been formed in the past four years after the figure slumped to fewer than 400,000 in 2009, according to the Census Bureau. That is bolstering the need for apartments, condos and furnishings.

“Separations and divorce often create additional housing demand by creating two households when there was one,” said David Crowe, chief economist at the National Association of Home Builders in Washington.

That has contributed to the rebound in home construction. Housing starts surged 67 percent to 923,400 in 2013 from 2009, according to Commerce Department data. Multifamily housing starts have almost tripled since the recession and accounted for 33 percent of residential construction in 2013, up from 20 percent in 2009.

Newly single men have been renting apartments in suburban markets as they seek to stay close to their children and attend school events, said Gregory Mutz, AMLI Residential Properties Trust chief executive officer. The Chicago-based company develops and acquires luxury apartments in the United States.

“In unhappy marriages, they have started having the macroeconomic ability to unwind,” he said. That is creating “a little bit of a tailwind” for apartments.

About 150,000 divorces were postponed or avoided between 2009 and 2011, said Philip Cohen, a sociology professor at the University of Maryland who linked breakups to the economic cycle in a January 2014 paper.

Both marriages and dissolutions are tied to unemployment, University of Arizona’s Schaller found in a May 2012 paper. Each one percentage point increase in the jobless rate is associated with a 1.5 percent decrease in the marriage rate and 1.7 percent drop in the divorce rate, she calculated.

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