Around here it's tackle football that's really shrinking at the youth level, not baseball. A friend of mine has been involved for 10 years in the local junior all-american football program -- they used to have six teams of 33 players each (~200 kids) playing tackle football, but the last couple of years they have been able to field only four teams, and most of them aren't close to full. Numbers are down 40-50%, in an area with a stable population of kids.
FWIW, 2006-2008 (kids turning 11-12-13 this year) were huge birth years in the U.S., averaging 4.3 million births. In fact, 2007 exceeded the peak year during the baby boom. So it's not a shortage of kids, at least not at the national level (individual cities and towns could have very different trends).