November 17, 2011
The NYT had an interesting piece discussing the large number of college graduates who have moved back home with their parents because they have been unable to find jobs. While this is an important economic and social trend, some of the numbers are clearly not right.
For example, it cites Mark Zandi as saying that the average new household adds $145,000 in output to the economy. The median household income is approximately $50,000. Most new households have incomes that are well below the median, since they are typically young people living alone. Even if the expenses associated with forming a household cause them to spend beyond their income, it would take an enormous burst of spending and a huge multiplier to get to $145,000. (Remember, this only counts the spending associated with moving into a new apartment or house, not spending on food, transportation, or health care that is largely independent of living in a separate household.)
The article also cites Zandi as estimating the pent-up demand for new households at 1.1 million which he puts as roughly equal to the number of vacant units for rent or sale. The Census Bureau reports that there are 7.2 million vacant units for sale or rent, with another 7.2 million vacant units being held off the market for a variety of reasons.
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