40-somethings dropping out of workforce, moving in with mom and dad

The drop in the unemployment rate in August to a 4 1/2-year low was hardly cause for celebration. The rate fell because more people stopped looking for work. KIRO Radio’s John Curley wanted to know where people dropping out of the workforce are going. What he found surprised him.

“I said to you, so if people are dropping out of the workforce, where are they going?” John said to CBS MoneyWatch correspondent Alexis Christoforous. “And what was the shocking headline you gave me?”

“They’re going back to mom and dad’s house, where else?” Christoforous said.

John wasn’t entirely shocked with this. We’ve heard of all the boomerang kids in their 20s returning home after college. But it wasn’t that age group she was talking about.

“You’ve got 40-somethings going back home,” said Christoforous. “When times are tough and mom and dad are fortunately still with you, and have a house, and can provide some food, and the basic things you leave to live, and they’re saying ‘yeah, come on back,’ that is what a lot of folks are doing.”

Christoforous said people in their 40s moving back in with mom and dad aren’t necessarily happy about it.

“They’re doing it because they know it’s going to buy them some time. They’ll be able to live at home and then hopefully search for some work and hopefully be out on their own again.”

According to the August numbers, more than 300,000 people stopped working or looking for a job. Their exodus shrank the so-called labor force participation rate, the percentage of adult Americans with a job or seeking one, to 63.2 percent. It’s the lowest participation rate since August 1978.

Once people without a job stop looking for one, the government no longer counts them as unemployed. That’s why the unemployment rate dropped to 7.3 percent in August from 7.4 percent in July, even though 115,000 fewer people said they had jobs.

“On the surface, one would look at that and go say, ‘it’s 7.3 percent, it’s a five-year low, why isn’t Wall Street rallying and we’re all happy?'” said Christoforous. “That is because the unemployment rate dropped for all the wrong reasons. More people dropped out of the workforce, so they’re no longer counted as unemployed in that number.”

If those who left the labor force last month had still been looking for work, the unemployment rate would have risen to 7.5 percent in August.

And more people moving home, Christoforous said, won’t help the economy or the job market.

“If these folks are so dependent that they need to move back in with mom and dad after decades of being on their own, it means they don’t have the money to go out and spend,” said Christoforous. “And consumer spending generates 70 percent of our economic activity, so the fewer people out there spending on TVs and cars and what have you, it’s not a good story for the overall economy and the for the overall job market.”

The Associated Press contributed to this report.