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Millennials stay put amid economic uncertainty

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By Bloomberg News
Saturday, May 17, 2014, 9:00 p.m.
 

Ryan Yang could have taken a job in a New Jersey DNA sequencing laboratory upon graduating from college last year. Instead, the 23-year-old lives with his family in Queens, still unemployed and searching.

With the expense of commuting or relocating, “I thought about it and it just didn't seem right,” said Yang, a biology major who rejected the job 50 miles away in Piscataway to look for opportunities closer to home. “If I was previously living in New Jersey, I think I would have taken that job in a heartbeat.”

Yang belongs to the age group, adults younger than 35, that's traditionally the most mobile part of an American workforce constantly on the move since the 19th century. Now, that's changing as members of the millennial generation, the estimated 85 million born from 1981 through 2000, prove less restless than their forebears. The standstill may be holding back recovery in the labor and housing markets.

“They remain stuck in place,” said William Frey, a senior fellow at the Brookings Institution in Washington who specializes in migration issues. “The recent slowdown is really an interaction of demographics and a continued housing- and labor-market freeze. Millennials are mired down, very cautious about buying a home or moving to new areas.”

While Frey's analysis of Census Bureau data shows Americans younger than 35 move almost twice as often as other age groups, the pace is slowing. In the year that ended March 2013, just 20.2 percent of those aged 25 to 34 relocated, the lowest rate for that age group in data going back to 1947, down from 31 percent in 1965, Frey said.

Older Americans

While the decline in mobility is more pronounced among the young, older Americans, too, have become less inclined to pull up stakes. Among all Americans, 11.7 percent moved in 2012-13, just above the 11.6 percent all-time low reached two years earlier, Frey said. After a pickup in mobility in 2011-12, “the comeback now appears to be stalled,” Frey said.

Economists and demographers say a combination of relatively low-paying opportunities, the burden of student loans and an aversion to taking risks explains the reluctance to relocate. Student-loan debt rose $114 billion in the year ended in December to $1.08 trillion, according to the Federal Reserve Bank of New York.

The decline in mobility among young adults “is economically significant,” said Chris Christopher, director of consumer economics for IHS Global Insight Inc. in Lexington, Mass. “It is a lot more expensive to get started, to move, to find a job. In terms of social mobility, job mobility, overall geographic mobility, they are not doing as well as their parents and grandparents.”

On the move

That amounts to a historic shift for a nation whose expansion relied on a mobile population. “One thing cannot be denied: America is always on the move,” wrote poet E.E. Cummings.

“Migration is a key advantage of the American system historically,” said Kenneth Johnson, senior demographer at the Carsey Institute at the University of New Hampshire in Durham. “The ability of growing areas to attract migrants from a large national labor pool has historically helped the U.S. adapt to changing economic conditions.”

If workers won't go where the jobs are, it takes longer for employers to fill vacancies. There were 4 million positions open in March, close to a six-year high, the Labor Department reported on May 9. The figure is among the job-market barometers that Fed Chair Janet Yellen tracks.

Regional mismatches

“Low mobility could exacerbate structural imbalances or mismatches based on geographic location of jobs versus workers,” said Harry Holzer, a professor of public policy at Georgetown University in Washington and former chief Labor Department economist.

The mismatches are evident in regional disparities in joblessness. In March, 59 of 372 American metropolitan areas had unemployment rates less than 5 percent, while 25 were more than 10 percent, the Labor Department reported April 29. Nationwide, joblessness dropped to 6.3 percent in April, the lowest level since September 2008.

The latest Fed Beige Book review of regional economic conditions highlighted the pinch, with six of 12 Fed districts — Dallas, New York, Cleveland, Richmond, Chicago and Kansas City — reporting difficulty finding skilled workers.

Stagnant wages

For those who can find job opportunities, sluggish wage growth makes them think twice about relocating, said Gary Burtless, a senior fellow at Brookings in Washington who was at the Labor Department.

Hourly earnings rose just 2.1 percent year-over-year on average since the recession ended in June 2009. That's after an average gain of 3.1 percent in the five years before the recession began.

There are signs the change in mobility may be more than a passing phase for the millennial generation, said Andrea Hershatter, senior associate dean at Emory University in Atlanta, who has studied the generation and presented research to the Atlanta Fed this year.

“Part of the decline is a lag — millennials do everything related to independence a bit later than previous generations — and part may be a genuine trend that implies a less physically mobile generation,” she said. “I do believe that they are more inclined than previously more nomadic generations to put down roots and to gravitate towards the comfort of the homes and institutions they never really rebelled against.”

Confidence lacking

Young people have delayed life decisions, including moving for jobs, forming households, getting married and having children, said Peter Francese, an independent demographer and consultant in Exeter, N.H.

“There is a lack of belief that there is something better in another state,” he said.

Slower household formation is lowering home ownership. Just 36.2 percent of Americans younger than 35 owned a home in the first quarter, compared with 41.3 percent in the 2008 first quarter, the Census Bureau reported April 29.

Staying put “goes to the tough financial situation many 20- and early 30-somethings are struggling with,” said Mark Zandi, chief economist at Moody's Analytics Inc. in West Chester. “As the job market continues to pick up, this group should benefit, form households and move. This will be a tell that the economy is finally off and running.”

 

 
 


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