Mixed race man paying bills in living room. Photo by Jamie Grill/ JGI/ Getty Images

One key economic factor is forcing millennials to move back home

Despite an improving economy, more millennials are living at home. According to a new study from the Pew Research Center, 26 percent of young adults reside with a parent or relative, up 4 percent since 2007 — the year before the Great Recession.

Back then, a reported 71 percent of millennials were living independently. Unsurprisingly, that rate fell in the Great Recession, and has kept falling through the recovery. It now sits at 67 percent.

Independent Living Has Not Recovered, as More Young Adults Live in Parents’ Home

Education does not seem to play a role in the trend of millennials living at home. In the past five years, the number of young adults living independently declined by 2 percent among not only high school-educated millennials, but also college-educated millennials. (The findings exclude currently enrolled full-time college students.)

Today, the economy is improving, especially when it comes to employment. The unemployment rate has finally dropped to 5.3 percent, according to June’s jobs report. For adult ages 18 to 34, the unemployment rate now stands at 7.7 percent, down from a peak 12.4 percent in 2010. Additionally, there are modest increases in wages and full-time work is up.

But as the graph shows below, the data don’t show a direct relationship between employment and millennials living on their own.

Labor Market Has Improved for Young Adults, Yet Living Independently of Family Has Declined

So if the economy is improving, why are more millennials living at home?

While job prospects have improved, wages for millennials have not returned to pre-recession levels, student debt hangs overhead and the memory of the worst of the Great Recession is all too fresh.

As the Pew Research Center reports, earnings for millennials still aren’t back to where they were in 2007. For the college-educated, median weekly earnings are now $951, versus $966 in 2007. For those with only high school degrees, earnings stand at $500, versus $527 in 2007.

As for debt — especially students loans — it’s increased dramatically. In 2001, 26 percent of young adults had student loans. In 2010? 40 percent.

In a recent paper, Federal Reserve economists Lisa J. Dettling and Joanne W. Hsu note the correlation between this debt and young adults living at home: “Our results indicate that increases in indebtedness — as measured by larger account balances, declines in credit scores, and delinquency on accounts — are associated with statistically significant and economically meaningful increases in the likelihood an individual will move into parental co-residence in the following period.”

While Pew’s data and Dettlings and Hsu’s data are not directly comparable due to different methods of collecting and analyzing data from the Current Population Survey, both sets depict similar trends. For about a 30-year period, the authors note, the percentage of young adults living with their parents held steady at around 31 to 32 percent. Around 2005 — three years before the Great Recession — the rate began a steady climb. In 2013 — three years after the recovery began — it reached a historic high of approximately 36 percent, according to their figures.

At the same time, the amount of money young adults owed in student loan debt also began to rise.

Seven in 10 graduates of public and nonprofit colleges in 2013 had student loan debt, which amounted to an average of $28,400 per borrower. Of those students who attended for-profit colleges in 2012, 96 percent took out student loans.

With lower incomes and higher debts, saving money looks like a no-brainer. And housing is a good place to start. Millennials spend between 30 to 50 percent of their incomes on rent. If you could save 30 to 50 percent of your income and start putting a dent in your massive debt, wouldn’t you?

Maybe moving back in with Mom and Dad doesn’t sound too bad.