Adults Who Move In With Their Parents Are Ruining The Economy

Times are rough for adults who move back into their parents' house. In addition to personal feelings of failure, they have to deal with the ugly stereotype that grown ups only live in their childhood home because they need more room for their action figure collection and only mom knows how to properly microwave their Hot Pockets. To make matters worse, now they're getting dumped on because their decision not to start their own home is hurting the economy.

Plenty of Americans are living with their parents after they've graduated college because they can't find a job. The New York Times reports that last month only 74% of people ages 25 to 34 were working. 14.2% of young adults haven't moved out of the home they grew up in, and 19% of young men are living with their parents. In addition to those who are unable to move out, there are also some who could probably make it if they shared an apartment with friends and subsisted on ramen noodles, but choose not to. They've decided it's worth it to sleep in a room with race car wallpaper for a few years if it means they can use what they would have paid for rent to build up their savings.

This presents a problem because it means a significant number of new grads aren't paying a landlord rent, buying crappy furniture at IKEA, and hiring movers. An economist at Moody's Analytics estimates that every time a new household is started it creates a ripple effect that puts $145,000 into the economy. Many young people hope they'll be able to save enough to buy their own home in a few years, but for the time being plumbers, construction workers, and Home Depot employees are losing money. For those of you who skipped economics class, the Times notes,

It's a phenomenon that John Maynard Keynes referred to as the "paradox of thrift": Saving is good for the individual, but en masse can hurt the economy by reducing demand.

Experts predict that the situation is creating a "pent-up demand" for housing. At a certain point, 29-year-olds will become fed up with mom getting upset everytime they stumble home at 4 a.m. Supposedly this will inspire them to move out, but that won't happen if the economy is still bad in two to four years. They may be ready to ship out, but there's a good chance that it still won't be a good financial move. The recession made people reevaluate their money decisions, and they may be more hesitant to enter a situation where they'll just be able to make ends meet. Until the economy magically bounces back, all we can do is shake our fists at these jerks who live with their parents for making things worse for the rest of us ... and congratulate them for trying to make smart financial decisions.

As New Graduates Return to Nest, Economy Also Feels the Pain [NYT]

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