The kids in the basement are staying there.
One lasting scar from the deepest recession since the 1930s is the phenomenon of young adults, facing their own financial challenges, squeezing into the homes of their parents. And new data show the trend is getting worse, not better.
In 2015, 15.1 percent of 25-to-34-year-olds were living with their parents, a fourth straight annual increase, according to an analysis of new Census Bureau data by the Population Reference Bureau in Washington, D.C. The proportion is the highest since at least 1960, according to demographer Mark Mather, associate vice president with PRB.
“It takes young people longer these days to find jobs with decent wages,” Mather said. “Young adults need to spend more time getting the necessary education and skills before they can become self-sufficient. The recession likely exacerbated this trend.”
Some of the delays may reflect changing social norms, as young people are delaying both marriage and having their own children, he said.
The tough job market for young people since the recession ended in June 2009 is also contributing to a lower mobility rate. Adults under 30 are typically the most mobile part of an American workforce, constantly on the move since the 19th century. That mobility has been seen as a key advantage of the flexible U.S. labor market compared with places like Europe.
The latest Census data show just 3.1 percent of Americans from 25 to 29 relocated in the past year between states, just half the share of 2002. While moves between counties in the same state — less likely to be for jobs — have increased some, they too remain below pre-recession levels, according to PRB’s analysis.
Goldman Sachs economists, who examined the phenomenon of “kids living in the basement” in an August report, found a few reasons to explain it.
Millennials, the 82 million people born between 1981 and about 2000, have been plagued by chronic underemployment since the recession — consider the college grad working as coffee barista — and rising student debt is proving to be a lasting burden.
“Above-average youth underemployment rates alone account for about one-third of the increase in the share of young people living with their parents, and lagged effects of the recession probably account for a bit more,” Goldman’s David Mericle and Karen Reichgott wrote.
There is a silver lining to the trend, they said. Presumably, all the adult children will one day leave their parents’ basements, and that household formation will prove to be a huge boost to a subpar housing recovery. There is already evidence this is occurring to some degree.
The Goldman economists are in that camp. “As a result, we continue to see plenty of upside for residential investment,” they wrote.
Written by Steve Matthews of Bloomberg