Move out? Millennials should live with their parents as long as possible

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It’s time to cut the millennials some slack.

It’s supposed to be terrible news that more people in their 20s and 30s are living at home with their parents. Pew Research, for instance, just reported that a record 57 million Americans — about 18% of the population — live in multigenerational households. The main reason for that is a sharp increase in the number of 25-to-34-year-olds crowding into the family abode with their parents and grandparents.

This “boomerang generation,” needless to say, is the target of much scorn over its slow start in life and its apparent aversion to independence. They’re also causing considerable anxiety among homebuilders, automakers, appliance manufacturers and many other companies that rely on a steady flow of U.S. consumers spending every last dollar on things prior generations considered indispensable.

Yet we should reexamine our assumptions about millennials, generally considered to be Americans born between the early 1980s and the early 2000s. We’re programmed to consider robust consumer spending the ultimate indicator of a healthy economy. If spending is down, something must be wrong. So alerts are going off as millennials bank what money they can instead of spending it on rent, cars and the endless filler items that tend to devour your paycheck when you live on your own.

Foolish? That’s actually shrewd. Good financial advisors urge people to save as much of their income as they can, so they can invest it, apply it toward a nest egg and set something aside for a rainy day. Yet Americans in general are terrible at this. The overall savings rate is a paltry 5% or so. That’s considered high, since it dropped near zero as recently as 2005. One reason so many Americans got swamped during the recent recession is they thought home equity and stock-market holdings were the same as savings, only to learn those “savings” can plummet in value.

Millennials obviously have reason to be frugal. The unemployment rate is highest among the youngest, while it’s far below average for people over 35. Older workers have been holding onto jobs longer and retiring later, slowing the rate of turnover throughout the labor force and leaving fewer openings for younger workers. Meanwhile, the total amount of student loan debt has skyrocketed during the past decade and now tops $1.1 trillion. Many recent college grads can’t find jobs that pay enough to cover rent and student loan payments both.

Living at home obviously allows young, struggling workers to pay off bills, get out of debt and make a meaningful contribution to the economy, at some point. So what if it lowers the household formation rate? So what if Ford (F) and GM (GM) don’t hit their sales targets for hipstermobiles? So what if Home Depot (HD) and Lowe’s (L) end up with excess inventory of light fixtures and vanities? Instead of griping, maybe all the companies desperate to crack open millennial wallets should feel reassured that the future spenders of America are doing something to right their finances.

There are other signs the millennials aren’t as bumbling as popular opinion suggests. Although data clearly show a spike in the percentage of young adults living with their parents, the Census Bureau surveys from which those numbers come count students living on college campuses as “living at home,” as the Atlantic recently pointed out. The latest Pew report excluded such students from its count of multigenerational homes, but most media reports about the boomerang generation lump the two groups together without pointing that out. That exaggerates the portion of millennials who ought to be self-supporting but aren’t.

There’s also some recent data suggesting millennials are starting to move out in larger numbers. Jed Kolko, chief economist at the real estate website Trulia, told Yahoo Finance recently that Trulia’s data shows a 0.9% increase in the percentage of 18-to-34-year-olds who bought a home in 2013. He’s more worried about a falling homeownership rate among strapped middle-aged consumers than among the young.

Living standards during the past decade or so have fallen more than at any time since the 1930s, which means the millennialls face challenges their parents and grandparents didn’t. It’s not reasonable to expect them to hit life’s big milestones at the same pace as their parents. They’ll move out eventually, and when they do, they'll have something to show for the extra time they spent at home.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

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