Household Formation Slowing: Good or Bad News for USPS?

In a recently released blog post, Mark Doms, Chief Economist, U.S. Department of Commerce commented on the increasing gap between population growth and household formation.   He notes that " though the slowdown in household formation coincided with the recession, as the economic recovery began and strengthened last year, household formation has yet to pick up."  Increased household formation results an increase in the number of delivery points and operating costs. 

A slowdown in household formation relative to the adult population results in more mail delivered per stop as each stop represents a slightly larger number of adults.   This trend should help the Postal Service as it reduces pressure to expand its delivery resources.

While pressure on delivery resources may be reduced, the continuing disconnect between household formation and population growth indicates economic strains that is bad for mail volume.   New household formation generate a significant amount of mail associated with utility, mortgage, and advertising that would not be sent if the person lived in a home/apartment already occupied by others.   Slower household formation may also reflect the economic challenges of individuals who are choosing not to establish separate households.   To the extent that mail volume is driven by advertising to individuals capable of buying, lower household formation suggests that the number of potential customers of advertisers may not be growing as fast as the adult population.

Going forward, even if employment levels improve over the next few years, there is little evidence that compensation levels will grow rapidly enough to reverse the trend of slower household formation.  In addition, the reversal of easy lending practices for first-time home buyers, will further slow household formation as individuals and couples save the 20% than many lenders are requiring for a down payment.   

The Postal Service and mailers have to follow this trend carefully to see if continues or reverts back to the pattern of the late 20th Century and early part of the last decade.   The Postal Service needs to look at how this trend affects the forecasts of the Boston Consulting Group and McKinnsey.   Mailers need to look at what they must do differently to ensure the effectiveness of their mailings that are sent to multi-adult households, and in particular multi-adult households that include children who live at home following graduation from high school or college.