Mark Zandi's son majored in philosophy. A 2013 graduate of Wake Forest University, he found his job prospects dim upon leaving school. Like so many young adults who have graduated from college since the Great Recession, he faced some harsh realities and had to make some tough choices.
The harsh reality was that as a graduate without a degree in math, science, engineering, or a health-care related field, he had virtually no job prospects. The tough choice he made was to move back home while he looked for work.
He was hardly alone. Zandi's son was just one of the growing ranks of 20-somethings—the so-called millennials—who have been forced to move back in with their parents due to a lack of steady income. According to estimates by Zandi and others, over 4.5 million more recent college grads are living at home with their parents today than were before the Great Recession. Zandi's son was simply part of that cosmically unfortunate crowd.
But not anymore. After nine months of searching, Zandi's son secured that highly sought-after first job and promptly moved into an apartment.
According to Zandi, who is chief economist at Moody's Analytics, his son's experience epitomizes how the economy has struggled to rebound these last five years and how it now appears to be picking up steam.
Speaking in mid-September at Dematic's annual Material Handling & Logistics Conference in Park City, Utah, Zandi pointed to his son's story as just one of many recent indicators of economic (and job) growth. In fact, he sees the economy trending to so-called "full employment," which economists define as a 5.5-percent unemployment rate, by 2016.
The U.S. economy, measured in terms of gross domestic product (GDP), has grown at a rate of roughly 2 percent per year, on average, over the past five years. "That growth rate has accelerated to 3 percent since the start of this year and next year should be closer to 4," Zandi says. "That's pretty heady growth, historically, and it is going to create jobs."
Zandi projects that a more robust economy will generate 2 million jobs in 2015 and another 3 million in 2016. "And not only are we creating more jobs, but the quality of jobs is [improving]," he says.
The result will be a continued and accelerated rebound in the U.S. housing market, a sector many economists view as the catalyst for the market meltdown of late 2008. "The collapse of the housing market was a significant hit to the economy," Zandi says. "House prices fell by about one-third. That type of price decline is Depression-like. The good news is that housing is making a comeback and will be a key driver of economic growth." He predicts that housing starts, currently pegged at roughly 1 million per year, will jump to more than 1.7 million per year based on "household formation"— economist speak for individuals grouping together to create a household.
"In a typical economy, we should see about 1.2 million households formed each year," Zandi says. "Those 4.5 million 20-somethings now living at home will find employment and will form households."
That's good news on several fronts—and not just for Zandi's son and his millennial cohorts. "Every single family home we put up equals 3.5 jobs that go well beyond well-paying construction jobs. There are jobs created in transportation, financial services, landscaping, and cable hookup," Zandi says. The job creation from housing, he adds, will run deep and will ultimately lead to full employment.