3, 2, 1… 3.5 million?
Seven years ago I stupidly blew all of my savings on a backpacking trip to Asia. I was 26-years old and had planned to come back in three months. Instead I was gone for a year, returning to New York only when I was completely broke and a little tired.
I had a few contacts and started trying to make my way as a freelance writer, but I struggled at first. I was earning a pittance and moved into a crappy apartment with a couple of friends.
A year later I had landed my first full-time journalism job and was making enough to leave the place and the two roommates (who were themselves moving into their own new apartments) and move into a slightly less crappy place with just one. And two years after that, I accepted another new, much better job, which I still have now – and I could finally afford to live alone.
At the risk of sounding like a crank, I've never enjoyed living with others, so I was thrilled that the size of my household had quickly gone from three to two to one.
In a healthy economy, this would be a typical experience shared by many young adults in their 20s and early 30s as they climb their way up the employment ladder.
The economic recovery since the recession of 2008 has been profoundly unhealthy, of course, but especially for young adults. Unemployment for those without college degrees – and that’s a majority – has been brutally high. And a historically big share of recent college graduates have also been forced to accept low-paying jobs for which they’re overqualified. There simply aren’t enough good jobs to absorb them all.
This is a huge deal for the entire economy, and not just for young people.
Think about it this way. Both times that I parted ways with ex-roommates, each of us had to buy some of the usual stuff that goes with moving into a new place: furniture, kitchenware, lighting, cleaning equipment.
When enough people do this, the extra spending on these items gets money flowing through the economy, generating activity in the industries that make them. If a lot of people are moving into new homes at the same time, the construction sector also reacts by building more houses or apartments. And as neighborhoods get more crowded, restaurants and barber shops and laundromats pop up in response to serve the newcomers.
The virtuous cycle means more jobs in those peripheral sectors, higher wages, more people getting their own place, and so on.
Yet since the start of the recession, the percentage of people aged 18-34 who were still living with their parents has climbed dramatically – a result of their difficult economic circumstances. According to estimates from Goldman Sachs economists, there would have been 3.5 million fewer young adults living with their parents at the end of 2012 if that percentage had stayed the same. It started to fall very slightly just last year, but it needs to decline much further.
Young adults in the post-recession period entered a much tougher labor market than people in earlier generations. That they have little wealth and low incomes (when they even have jobs) has resulted in the abysmally slow pace at which new households have been formed.
The recovery has been poorer because of it – for all of us.