Sunday, March 11, 2012

Is the lack of jobs to blame for more young people living with their parents?

As discussed before, the pressure on household formation is primarily coming from lower rates of family formation. The trend is quite unsettling as the number of young people living with their parents is continuing to grow to new records.

Source: JP Morgan

For many this is the new reality. Numerous explanations for this trend have been put forth, one of which is the decline in marriage rates - or delays of marriages. That in turn holds back household formation.


But the lack employment opportunities for the younger US population continues to be the primary suspect for this trend. The chart below shows the divergence in employment growth for young people vs. the older population. Some of this divergence is driven by permanent losses in low skill office jobs as well as structural changes that have taken place in construction employment.

Source: JP Morgan

One reason people continue to question the causality relationship between poor employment conditions and family formation is the fact that the last major disruption in younger population employment (2001) did not coincide with more younger people living at home. And the previous peak in the 25-34 year-olds living with their parents was actually during strong employment conditions in the US (90s).
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