Even Moving Back Home Hurts the Economy

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Another ironic illustration of the recession's vicious cycle: due to poor economic conditions, college graduates who can't find jobs head back home to live with their parents, which, in turn, appears to hurts the economy more because new households aren't being created. It's all just one downward spiral, as The New York TimesCatherine Rampell informs us in a more delicate way: 

Under normal circumstances, each time a household is formed it adds about $145,000 to output that year as the spending ripples through the economy, estimates Mark Zandi, chief economist at Moody’s Analytics. 

But with the poor job market and uncertain recovery, hundreds of thousands of Americans ... have tabled their moves. Even before the recession began, young people were leaving home later; now the bad economy has tethered them there indefinitely. Last year, just 950,000 new households were created. By comparison, about 1.3 million new households were formed in 2007, the year the recession began, according to Mr. Zandi. 

The Times, however, doesn't appear to be encouraging a "go shopping more" refrain (i.e. "go rent an apartment you can't afford") by noting this development. The newspaper points back to all the depressing numbers that hastened the situation in the first place: the lack of decent paying jobs for recent grads (which led to the "14.2 percent of young adults [that] are living with their parents"). Plus, the older generation seems to be better equipped to endure their now-grown kids living at home for awhile: there's that 47-to-1 wealth gap between typical younger and older households, according to Pew Research data.

This article is from the archive of our partner The Wire.