Tuesday, December 13, 2011

Households, Recessions, Marriage

Households form when young adults leave the nest and set up on their own. These moves are typically voluntary and happen because the person leaving has the means to support him or herself. On average (say in the 1971-2010 period), 62 percent of households are formed by young people marrying each other, 38 by going off alone. In either case, economic conditions have a strong influence on whether to leave the parental home. I find the following graphic, which charts increases in total households year by year since 1970—and also shows increases or decreases in total single-person households—fascinating:



I’ve included recessionary periods on the chart. The message they convey is somewhat ambiguous, but what is clear is that in the more severe recession—thus those of the longest duration or those that are close together, the economy seems definitely to influence household formations. This is clearly shown in the recessions of 1973, the two recessions close to each other in the early 1980s, and most pronounced in the Great Recession, the effects of which still linger on.

Notice here especially that single-person household numbers can show an actual absolute decline, which happened in 1983, 1987, 1993, 1994, 2009, and 2010. The young adults went home again.  Total household numbers do not shrink because the population is not declining but is growing, in recent years (2001-2009) at an average rate of 2.8 million a year.

Over the long term, increase in households is declining as shown in the following table:


Increase in Households - %
1940-1950
24.6
1950-1950
21.2
1960-1970
20.1
1970-1980
27.4
1980-1990
15.6
1990-2000
12.2
2000-2010
12.3

The peak in growth, from 1970 to 1980, is certainly due to the baby boom generation’s maturing, those born 1946 through 1964. Thereafter, more and more, marriage lost its hold on the American public. In the 1970-2010 period, total households grew at the rate of 1.6 percent a year, single-households at the rate of 2.7, family households at the rate of 1.1 percent annually.

We’re not there yet—and it’s my conviction that curves never drop nor ever rise forever—but for many people “bowling alone” is a daily reality—until the money runs out and it’s back to the parents again.

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