In yet another sign of the times, 85% of college graduates surveyed have reported that they will be moving home after they get their degrees:
Stubbornly high unemployment — nearly 15% for those ages 20-24 — has made finding a job nearly impossible. And without a job, there’s nowhere for these young adults to go but back to their old bedrooms, curfews and chore charts. Meet the boomerangers.
“This recession has hit young adults particularly hard,” according to Rich Morin, senior editor at the Pew Research Center in DC.
So hard that a whopping 85% of college seniors planned to move back home with their parents after graduation last May, according to a poll by Twentysomething Inc., a marketing and research firm based in Philadelphia. That rate has steadily risen from 67% in 2006.
“It’s peaking at levels we have not seen before,” said David Morrison, managing director and founder of Twentysomething.
While unemployment for college grads is 15% according to Bloomberg, we know for a fact that the overall rate of unemployment, per economist John Williams of Shadow States, is actually at around 22%.
It’s not just college students, it’s everybody – one in five able bodied Americans are out of work right now.
There is a reason that these numbers, especially for college grads, are peaking at levels we have never seen before: it’s because our economy is shambles with no clear recovery in sight.
According to the New York Times, we’ve lost so many job through this year, that at this rate it will actually take until the year 2020 to recoup most of them. That is, just to break even! Our economy has to create 150,000 jobs per month just to keep the current employment/unemployment rate at current levels – and that is simply not happening. In essence, even if we add 50,000 jobs per month, we’re technically still increasing our unemployment rate because more people are hitting the workforce each month than there are jobs created.
The important consideration to make is that the 2020 estimate is based on economic conditions up until now, not accounting for the potential losses to come. It seems that this statistic actually forecasts growth going forward, not additional losses. When you hear 2020, you’re hearing a “best case” scenario.
For savvy SHTFplan readers, you know that unemployment is actually going to rise, as there is no economic growth to be had. Thus, for all we know, we may not see recovery in employment for several decades.
For college grads, it gets even worse. Not only can they not find a job, but they are putting financial pressure on their parents, who will now have to continue providing a home, food, and utilities until such time that their boomerang kid can get some meaningful work and contribute financially to the household. On top of that, they are debt laden with an average debt of over $23,000 once they graduate college. Considering that up until the recession, the average graduate made just $30,000 per year in an entry level position, and the fact that those types of jobs are no few and far between, we can see the potential for a new round of debt-defaults in the near future.
Can anyone say College Loan and Education Bubble?
The theory of “biflation,” one that we have presented to our readers in the past, suggests that there is a possibility of price deflation in debt based assets such as homes, and price inflation in essential goods such as food and energy. We’d mark college education as a debt-based asset, because these days most students depend on loans to pay costly tuition fees.This, like home prices, is simply not sustainable.The very same bubble that was created by easy Fed lending policies has led to a similar situation in college eduction. As credit became loose, and everyone with a pulse applied for a college loan and got one, the price of college eduction rose sharply.
We can confidently forecast a drop in college tuitions coming to campuses around the country in the very near future. Note, however, that these price decreases will be in “real” terms, as opposed to “nominal” terms. Don’t forget, The Fed is still printing tens of billions of dollars every month, and as such, the dollar-based price of pretty much everything is likely to go up. In real terms, however, say, compare to gold or energy or food, the price of college tuition (and housing) is going to see contraction.