Unemployed Millennials Holding Back US Economic Recovery
$GS
Goldman Sachs Group Inc. (NYSE:GS) has some insights about what is holding back the millennial generation.
The lackluster jobs market, housing affordability, student loan debt and delayed marriage may keep a cap on household formation for years to come, according to Goldie’s analysis.
“The share of young people living with their parents has increased relative to pre-recession rates for all labor force status groups, not just the unemployed and underemployed,” said Jan Hatzius, chief economist at Goldman. “The share of 18- to 34-yr-olds living at home might not fully return to pre-recession rates.”
The percentage of the millennials group living at home had hung around 27% before the Great Recession in Y 2008 triggered a spike to more than 31%, according to data compiled by the US Department of Commerce and Goldman. The higher portion of family home dwellers is blamed for holding back a stronger recovery based on higher wages and spending growth that bolster each other in a virtuous cycle.
The millennial generation has about 53.5-M people in the labor force, surpassing Generation X’s 52.7-M and Baby Boomers’ 44.6-M workers, according to a study by Pew Research. A major difficulty facing millennials is the high number of part-timers who want a full-time job, Goldman says.
“Young people’s labor market prospects have not fully recovered, with involuntary part-time employment in particular a continuing problem,” Mr. Hatzius says in the 3 August report, which was co-authored by Goldman economists David Mericle and Karen Reichgott.
The economic recovery has been gradual, with the problem of lower household formation only partly explained by employment data, Goldman’s analysts say.
“While moving into a rental unit usually presents a lower hurdle than becoming a homeowner, millennials who now have jobs but struggled in recent years might not have enough savings to cover an initial deposit,” according to their report, “or might fall short of landlords’ expectations for a potential tenant’s credit score, savings or income history.”
Student loan debt has risen to a record $1.2-T, making it the most significant liability after home mortgages, according to data from the Federal Reserve Bank of New York.
In addition to carrying record levels of student debt and marrying later in life, millennials are confronting unaffordable housing with rent-to-income ratios at historic highs, Goldman says.
Despite the difficulties face by the millennial generation, its massive size bodes well for home building, even if only 67% of family home “basement-dwellers” move out in the next 10 years, Goldman says.
“Such a scenario would imply a trend demand for new housing units of about 1.6-M per year, well above the current sub-1.2-M run rate of housing starts,” Mr. Hatzius says. “We continue to see plenty of upside for residential investment.”
Stay tuned…
Paul Ebeling
HeffX-LTN
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