District Overview: ''Leaving the Nest'' Is Easier in Arkansas than Elsewhere in the District and Nation

October 09, 2015
By  Maria E Canon Charles S. Gascon

Reports on the millennial generation1 continue to suggest that changes in household formation and economic dynamics during the past decade may be more than prolonged effects from the Great Recession. Millennials who are overwhelmed with student debt, weak job prospects and an uncertain housing market are often moving back in with their parents or other family members. Those who do "leave the nest" and don't return to it struggle to afford the down payment on a house; their rents are rising, making homeownership increasingly unattainable. The result is a lack of first-time homebuyers, which restrains the recovery in the housing market and, thus, overall economic growth.

The first column in the table shows the percentage of 25-year-olds who live with parents or older relatives (henceforth "parents"); the percentages are given for the nation and for the states in the Eighth District.2 Nationally, almost half of 25-year-olds lived with their parents in 2012-13, up from more than a quarter in 1999. Among the District states, the rates of parental co-residence were typically lower than the national average; however, the growth since 1999 has been quite similar. Nationally, the highest levels of co-residence were typically in the northeastern states.

In this article, we review some of the literature on millennials' moving back home and focus on the relevant statistics for labor markets, housing markets and student debt for the seven states in the Fed's Eighth District and for the nation as a whole.

Labor Market

As economist Jaison Abel and co-authors pointed out, individuals at the beginning of their careers often need more time to transition into the labor market. Unemployment rates of those between 21 and 27 reflect this fact. (See "Unemployment Rate, Youth" in the table.) The unemployment rate for these people is generally above the rates for potential workers of all ages. Among the states in the District, the youth unemployment rates are the lowest in Missouri and highest in Mississippi.

Earning a college degree does help labor market outcomes, and young adults with a college degree are more likely to live independently.3 Their lower unemployment rate, however, does not fully capture the labor market for recent graduates. Abel and co-authors noted that during the recession the underemployment rate for recent graduates was about 40 percent, which means close to half of recent graduates were working in jobs that did not require a degree. An implication is that a significant portion of recent graduates were earning lower wages than what they should have been, given their education.

Economist Philip Oreopoulos and co-authors found that those "unlucky graduates" who enter the job market during a recession not only suffer in the short-term but will pay a price for about a decade. That's because they start work for lower-paying employers and slowly work their way up toward better-paying jobs.

Housing Market

Economist Zachary Bleemer and co-authors found that economic growth may also have constraining effects on millennials' ability to live independently. On the one hand, an improved labor market makes it easier for them to find a job and earn income; on the other hand, stronger economic (and population) growth in some areas limits the supply of housing, pushing up prices. Since 2012, national house prices have increased 21 percent. In many areas, rental price growth has been faster. Because most youth would be first-time homebuyers, they have no housing equity to regain from the rebound in house prices after the housing crash.

In the Eighth District states, home price growth has been slower than the national average, and, generally, housing remains more affordable. Nationally, the median house costs 3.3 times the median household income. In most of the District states, the median house costs less than 3 times the median income. Housing is most affordable in Arkansas, Indiana and Mississippi. The slower growth in prices can be tied to slower population growth in the District states, along with a larger supply of available land for housing.

Student Debt

A 2014 survey of first-time homebuyers found that over half of respondents indicated that student-loan debt was delaying their saving for a down payment on a house.4 Consistent with the survey results, Bleemer and his co-authors found that a $10,000 increase in a student's average debt increases by about 2 percentage points the probability that by the age of 25 he or she will be living with parents or other family members. The data in the table show that the average borrower in the District tends to have slightly lower student-debt levels than the national average; however, student-debt growth in the District has generally been faster than the national average in recent years.5


Combining state-level information on the relevant statistics for labor markets, housing markets and student debt is useful in understanding the differences in co-residence of millennials in District states and the nation. Although the differences may be difficult to decipher on the margins, the ends of the spectrum are clear. Arkansas has some of the lowest youth unemployment rates in the District, the slowest house price growth, most affordable housing and the lowest levels of student debt. So, it's not surprising that it has the lowest rate of 25-year-olds living with their parents. On the other hand, Illinois has the highest rate of co-residence, which is consistent with higher unemployment rates, less affordable housing and higher levels of student debt.


  1. Millennials are often identified as those born after 1981. [back to text]
  2. Specifically, the percentage of 25-year-olds who share an address, down to the apartment number, with household members 15 to 45 years older. For more information, see Bleemer et al. [back to text]
  3. See Fry. [back to text]
  4. See National Association of Realtors. [back to text]
  5. See Gascon and Noeth. [back to text]


Abel, Jaison R; Deitz, Richard; and Su, Yaqin. "Are Recent College Graduates Finding Good Jobs?" Federal Reserve Bank of New York Current Issues in Economics and Finance, 2014, Vol. 20, No. 1.

Bleemer, Zachary; Brown, Meta; Lee, Donghoon; and van der Klaauw, Wilbert. "Debt, Jobs, or Housing: What's Keeping Millennials at Home?" Federal Reserve Bank of New York Staff Report, June 2015, No. 700.

Fry, Richard. "More Millennials Living with Family despite Improved Job Market." Pew Research Center, Washington, D.C.; July 2015.

Gascon, Charles; and Noeth, Bryan. "Student-Loan Debt in the District: Reasons behind the Recent Increase." Federal Reserve Bank of St. Louis The Regional Economist, October 2013, Vol. 21, No. 4, pp. 20-22.

National Association of Realtors. "2014 Profile of Home Buyers and Sellers."

Oreopoulos, Philip; von Wachter, Till; and Heisz, Andrew. "The Short- and Long-Term Career Effects of Graduating in a Recession." American Economic Journal: Applied Economics, 2012, Vol. 4, No. 1, pp. 1-29.

About the Author
Charles S. Gascon
Charles S. Gascon

Charles Gascon is a senior economist at the Federal Reserve Bank of St. Louis. His focus is studying economic conditions in the Eighth District. He joined the St. Louis Fed in 2006. Read more about the author and his research.

Charles S. Gascon
Charles S. Gascon

Charles Gascon is a senior economist at the Federal Reserve Bank of St. Louis. His focus is studying economic conditions in the Eighth District. He joined the St. Louis Fed in 2006. Read more about the author and his research.

Views expressed in Regional Economist are not necessarily those of the St. Louis Fed or Federal Reserve System.

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