Mom! Dad! I’m Home!

Posted by Michael A. Kamperman on May 12, 2009

This year unlike any year in recent history college and high school graduates with grandiose dreams will find themselves moving back home with mom and dad.  A recent survey of college career placement counselors indicates 22% fewer of this year’s graduates will have landed a job by graduation compared to last year.  Most companies have hiring freezes even if they haven’t actually laid workers off yet.  While companies will replace a key experienced employee they are not generally hiring new workers.  In fact the anecdotal evidence is much worse.   At some colleges 20% of graduates have jobs, 20% are heading off to grad school, and 60% have no set opportunities.  This will have a significant impact on both upcoming unemployment and the housing market.

In the Great Depression not nearly as many young people attended college, junior college, or professional training schools as do today.  Many didn’t even graduate high school in the early 1930’s.  This means there was not as large of a major move at one time of workers into the labor force.  This June the Labor Department number crunchers will make a seasonal adjustment to unemployment that assumes the same percentage of these graduates will have found employment opportunities as in previous years.  Later in the year the unemployment survey will begin to pick up that many of these new workers seeking full-time work are unemployed.  But importantly it will count as employed those working part-time yet living at home with mom and dad.  This is because part-time workers are counted in the commonly reported U-3 unemployment rate as employed even if they are seeking full-time work.

In addition to a rise in unemployment there will not be the natural absorption of rental apartments and new starter homes that normally comes from recent graduates.  We have reached the point where the rising unemployment rate is impacting industries.  With kids moving home that mom and dad thought would be on their own I look for some moms and dads to tighten the belt as well.  In order to get out of the depression we have entered we will not only have to stop losing jobs, but we will have to start creating them as well.