New Study Highlights an Unusual Trend
Millennials, just like past generations that were hit by economic hardship, have struggled to start their careers and find jobs that pay them a living wage. However, with employment rates increasing and median weekly earnings on the rise, 18-34 year olds are bucking one trend that their parents set: moving out.
That is the inference from a recent study by the Pew Research Center that analyzed data from the Census Bureau's Current Population Survey from 2007 through the first four months of 2015. The title says it all: "More Millennials Living with Family despite Improved Job Market." Philip Bump of the Washington Post acquired similar data back to 1968, and concluded that the reaction of millennials to economic recovery is different from that of the Baby Boomers and Generation X.
In 2007, before the Great Recession hit in earnest, there were 59.8 million young adults between the ages of 18-34 (excluding full-time college students) in the U.S., and 71% of them were living independently. That number has been on a steady decline to approximately 67% of the 62.6 million millennials in the U.S. in 2015.
In essence, the numbers of households headed by millennials has stayed nearly constant since 2007 (dropping slightly from 25.2 million to 25 million). The trend has held even though unemployment declined from a peak of 12.4% in 2010 to 7.7% in 2015, and is approaching the pre-recession number of 6.2% in 2007.
Education levels do not seem to play a factor in the living arrangement trend. Both the college-educated and those with no more than high school diplomas experienced a 2% drop in the number of millennials living independently from their parents. While student debt has been cited as a factor by other studies, the constant rate across education levels suggests that student debt is not a dominant factor.
In essence, the recovery has been stronger among the college-educated, but they have not used their gains to seek independence.
How about wages as a factor? Median weekly earnings are up slightly in inflation-adjusted numbers, at $574 through April 2015 compared to a low mark of $547 in 2012, but they are still below the $592 level reached in 2008. It is reasonable to assume that even though we are in an economic recovery on the broad scale, too many individuals are not earning enough to feel confident in moving out and starting a new household.
The study does not come to any conclusions as to why there is a disconnect between the economic recovery and the independent living situation of millennials; it just notes that the disconnect exists. Perhaps the reasons are a combination of convenience, planning, and psychology.
Some millennials are probably gun-shy after seeing the effects of the recession on homeowners, and those who aspire to be homeowners may be taking the opportunity to live with their parents and save money for an eventual purchase. The extra costs of an apartment may not be worth the delay. Others may just be comfortable with the arrangement and see no reason to change if their parents do not mind. If it isn't broken, why fix it?
If this trend continues, expect multiple studies trying to find out the reason why. Without more millennials establishing new households and spending accordingly, it will be hard for the economic recovery to surpass its current anemic rate.