For First Time Ever, Average Size of U.S Household Is Growing. NewsWire

NEWSWIRE: 10/7/19

• This decade will likely be the first in at least 160 years in which American households have more people than before. Shifts that are driving the uptick in U.S. household size include growing shares of multigenerational households and “doubled-up” households with roommates. (Pew Research Center)
• NH: Throughout nearly all of recorded history, most people lived together in large groups. Homes were relatively expensive to build and maintain. Living and working together provided vital economies of scale to people whose incomes were barely above subsistence. Higher fertility and shorter lifespans expanded the share of dependent children and winnowed the share of independent elders. And the culture reinforced the social virtues of obedience and cooperation.
  
• All that began changing two centuries ago in the world's most affluent or "modern" societies. And today it is changing across most of the world, except perhaps among the most rural, most traditional, and lowest-income societies.
• What happened? Homes became relatively cheaper and easier to maintain. Higher real incomes made household economies of scale less important--and increased the value of the market division of labor. (Today, a pizza delivered to your door through a market transaction is a lot cheaper, for most people than the time-value of a home-cooked meal.) Fertility steadily fell, reducing the number of children per household. Longevity rose, increasing the number of surviving elders. And as for the culture, well, individual liberty is pretty much the leitmotiv of modernity.
• The Pew study documents this gradual shift by simply tabulating the decennial U.S. Census figures for average household size since 1790. It shows that every decade, the figure has declined--from 5.79 non-slave Americans per household in 1790 (which was already far below the European norm) to 5.50 on the eve of the Civil War. And then to 4.93 in 1890, to 3.67 in 1940, and all the way down to 2.58 in 2010.
• But--and this is the main news of the Pew study--that number has risen to 2.63 in 2018. Thus, barring an unexpected surprise in the 2020 decennial Census, the 2010s could see the first-ever decade-over-decade rise. See the first three charts below.
• Strictly speaking, I must add, Pew's conclusion may be unverifiable. The Census definition of "household" has changed over the decades. This leaves us with no reliable figures from 1790 to 1850. And in 1940, the Census shifted their methodology in a way that creates a comparability gap with earlier years. This is critical, because the 1930s may have also experienced some rise in average household size due to economic hardship, a birth bust, and plenty of group living. Multi-generational families living together in old Victorian homes--an image popularized in Frank Capra movies like "Mr. Smith Goes to Washington" and "You Can't Take It With You"--was a much-discussed reality of the Great Depression. This created, following World War II, huge hunger for the suburbs and the nuclear-family lifestyle of the Truman and Eisenhower years.
• Yet the overall message of the Pew study is sound: Starting with the Great Recession, the trend toward ever-smaller household size may have come to an end--if not for the first time then at least for one of the very few times in American history. This is a message I've been banging on for several years now. (See "Household Formation: Why Is It Declining--And Where Is It Going?" and "How Togetherness Is Killing the Housing Market.")
• Driving this post-2010 reversal are many of the same drivers we saw during the 1930s: Flat or declining real median incomes, especially for younger adults; later marriage; declining fertility; and a resurgence in the cultural popularity of group living. The rising-adult Millennial Generation--an unprecedented share of whom are living with their parents or with each other--are spearheading this trend. But even older generations are living together more than people in their age bracket used to. Co-housing and "intentional communities" are becoming newly popular among retiring Boomers. The "solo living" lifestyle is no longer as popular as it once was. (See "All the Lonely People.")
• By my calculation, declining per-adult household formation from 2006 to 2018 reduced the total number of U.S. households by nearly 2 million over those eleven years.
• The economic impact of this weaker household growth will, of course, be most directly felt in the housing industry. Despite welcome signs of strength last month, the housing industry since 2010 has suffered by far its weakest performance of any recovery since VJ-Day. Through the American High, falling household size was a giant tailwind for the housing history. Today, the rising household size is a headwind.
• And the future? That depends. If the gradual rise in persons per household continues for another decade, we could be looking at a net demand for only 550,000 units per year by 2030. For anyone in housing, that would be an ominous prospect indeed. See charts four and five below.

• New Census figures show that large U.S. cities are continuing to lose early-wave Millennials, who are leaving in search of cheaper housing and better schools. For the fourth year in a row, big cities from New York to Houston to San Francisco shed tens of thousands of 25- to 39-year-olds. (The Wall Street Journal)
• NH: Let me start here with a few concessive clauses. Yes, Millennials remain very attracted to glitzy big cities where most of the highest-paid job opportunities are. Compared with prior generations at the same age, Millennials are significantly more attracted to big cities than Xers or (certainly) Boomers were as young adults. And, during much of the recovery, there was a sizable net in-migration of 25-to-39-year-olds into these big cities.
• Over the last three or four years, however, the flow has shifted direction. While the net flow of Millennials in their early 20s is still toward large cities (defined as having a population larger than half a million), the net flow of older Millennials has shifted back the other way--mainly to the suburbs.
• Why the shift? Several reasons. Labor markets are tightening and wages are rising outside the urban centers, making non-city jobs more attractive. The high and rising cost of living in most big cities (especially the cost of housing) is making urban life less affordable for young people. And many businesses, in response, are beginning to relocate to less urban and lower-cost areas. (Think of all the firms that are moving from the pricey California west coast to Texas, Nevada, Utah, and Colorado).
• Keep in mind that these net inflow and outflow numbers, while influential at the margin, are small in absolute numbers. From 2011 to 2014, big cities gained nearly 100,000 of the 25-to-39 age bracket. But the total population in this age bracket weighs in at nearly 60 million. So we're talking about a small fraction of one percent.
• As Joel Kotkin eloquently points out, neo-urbanists like Richard Florida have long exaggerated the attractiveness of urban living for Millennials. Sure, Millennials like the diversity and excitement and achievement opportunities big cities offer. But like other generations, the great majority of Millennials live outside of big cities and most continue to choose the suburbs or small towns as their "ideal" habitat even if they don't (yet) live there--just as most Millennials continue to say that they ultimately want to get married even if they're still single. As for Millennials who do get married and have kids, they continue to leave big cities for the same reasons their parents did--for more space, better schools, and a stabler sense of community.
• One more thing. Contrary to popular impression, big cities in the south and midwest have gained just as much from Millennial in-migration over the past decade as big cities on the west and east coasts. What's more, it appears that the recent net emigration of Millennials from big cities is coming increasingly at the expense of the blue zone metros.
• Of all seven cities that lost the most young adults in 2018--Portland, San Francisco, Chicago, New York, Washington DC, Las Vegas, and Houston--five could fairly be called blue zone urban magnets. Indeed, New York and Chicago last year registered declines in total population. Here's what these five all have in common: high tax rates, high housing costs, high minimum wage laws, and little new housing construction due to NIMBY and environmental regulations. (All five rank among the "20 most expensive U.S. cities to live in.") The decline in Houston can mostly be ascribed to the cyclical fortunes of the energy industry. But overall southern cities--as well as southern and southwestern states generally--are moving ahead of other regions in population growth among all age brackets, Millennials included.

• The unusually diverse restaurant scene in Gimhae, a midsized city in South Korea, reflects the results of a decade of government policy. To address labor shortages, officials made it easier for citizens from other Asian countries to obtain work visas, leading to an influx of foreign residents starting in the mid-2000s. (The Economist)
• NH: Like Japan, its rapidly aging neighbor (see "Japan Needs Workers and They're Bringing in Foreign Workers"), South Korea is steadily expanding its special work visa program and bringing in larger numbers of workers from other Asian countries. For the first time in history--invasions aside--parts of Seoul and some provincial capitals are experiencing some cultural and ethnic diversity. We'll see how the South Koreans respond to this novelty.
  
  
• A new analysis shows how the economies of Democratic and Republican districts are becoming as polarized as their politics. The median household income, education level, and GDP per seat of Democratic and Republican districts used to be near parity, but Democratic districts have pulled significantly ahead on all these measures. (Brookings Institution)
• NH: At first glance, it seems like a paradox.
• On the one hand, every exit poll shows that the average GOP voter has a higher income than the average Democratic voter. In 2018, for example, the share of voters reporting less than $50,000 in income was 56% for the Democrats and 42% for the Republicans. In the populist Trump era, to be sure, this national gap may have declined a bit from where it was in 2014. And, nationwide, the partisan divide by income is now less important than the partisan divide by age or race or education or region. But it's still certainly there. (See “The 2018 Midterms: A Tale of Two Americas.")
• On the other hand, if you break down the United States into its 435 electoral districts, those districts that vote for Democrats are considerably more affluent and productive than those districts that vote for the Republicans. And, as this Brookings study ably points out, the blue zone-red zone gap in affluence has been growing dramatically over the past decade. In 2008, for example, GDP per resident was 7% higher in the Democratic-voting districts. In 2018, it was 49% higher. In 2008, median household income was slightly less in Democratic voting districts. In 2018, it was 15% higher. See charts below. See also these gorgeous WSJ infographics.
• So how can both be true? Well, the apparent contradiction derives from what social scientists call the fallacy of composition. It is true that red-zone districts have lower average incomes than blue-zone districts--and that the gap between the two is rapidly widening. But it is also that, within each district, the affluent are voting more for the GOP than for Democrats. The apparent contradiction suggests that the income divide within each district is larger than the income divide nationally. Looking at Massachusetts and Arkansas separately, for example, we would see a high correlation between party preference and income. But if we looked at the two states together we might see no correlation, or it might even flip the other way since the typical Massachusetts Democrat probably has a higher income than the typical Arkansas Republican.
• What this shows is that the Trump-era "populist" realignment of the political parties is more a function of regional culture, urbanization, education, and economic growth--all of which are associated with higher or lower household income--than they are of household income per se relative to the national average. Rural and less educated and less economically buoyant districts are increasingly sorting themselves into the GOP camp. Suburban and more educated and more economically productive districts are meanwhile sorting themselves into the Democratic camp. Within each district, however, the "haves" and "have-nots" continue to vote for different parties, maybe more than ever before.
• Back in 2005, Thomas Frank was among the first progressive to ask, in a book by that name, "What's the Matter with Kansas?" Why is it, he wondered, that red-zone America keeps voting against the party that brands itself as benefiting the poor and the needy--when red-zone Americans themselves are among the poorest and neediest? After Trump, many Democratic leaders have asked the same question. Quite obviously, some of the biggest drivers behind populism cannot be measured in dollars and cents.

• Forever 21 has filed for bankruptcy, marking a tipping point in the fast-fashion era. Growing concerns about sustainability among young consumers and fierce competition from online upstarts have dethroned the mall giant that pioneered cheap, disposable clothes. (The Washington Post)
• NH: I'm not surprised. Fast fashion is not dead as a category (see Target), but it's certainly on the defensive. At the premium end, it is ceding space to "slow" and sustainable fashion. And at the discount end, its margins are getting undermined by the growing rental and thrift-shop industry. (See "Fashion: Fast and Slow" and "'Let's Go Thrifting'... the New Millennial Pastime.") In order to succeed, a fast-fashion brand now has to stress durability and the "basic" look; it has to be aware of sustainability and waste, and it has to be expertly promoted on social media. Forever 21 failed on all of these counts.
• As premiums and deductibles rise faster than workers’ earnings, employer health insurance is increasingly out of reach. The price hikes have been especially tough on small businesses and employees with low incomes, with the average premium for a family up 22% in the past five years alone. (Kaiser Family Foundation)
• NH: The KFF publishes the gold-standard annual report on U.S. employer-sponsored health insurance. A recent NYT story summarizes some of this year's main findings. (See the first chart below.) This report, as well as that of the annual Milliman Medical Index, has recently sounded a monotonously repeating theme. Nearly every year, the annual premium cost born by each worker has been going up faster than worker earnings. And nearly every year, the annual deductible payable by each worker or family member has been going up faster than worker earnings.
• To be specific (see charts below), for workers with family coverage, the average worker contribution to premiums is now $5,200 at large firms and $7,800 at small firms--up roughly 350% over the last twenty years. Meanwhile, the share of covered workers paying a general annual deductible has risen from 55% to 85%. And the average amount of that deductible, for single coverage, has tripled from roughly $580 to $1,600. How much would that be, altogether, for a family of four? The KFF doesn't publish that number. But the Milliman Index did, for 2018. It amounted to just over $12,000.
• Here, we're not talking about the 10% of Americans who lack insurance altogether. Or the further 25% of working-age Americans who submit to means-tested Medicaid. Or to the growing number of employer-sponsored policies that are (despite the ACA) able to terminate coverage due to preexisting conditions. We're just talking about the travails of normal working families, at all income levels, who are supposed to be "well covered."
• No wonder that surveys show healthcare is far and away the biggest issue that voters in both parties want addressed in the 2020 election. Or that Elizabeth Warren can plausibly argue--after these endless cost hikes--that ever-fewer Americans like their insurance coverage. Even more than higher education, healthcare is an industry plagued by runaway cost and stagnant (and perhaps even negative) productivity growth.
• The Democratic Party has a great issue here worth running on. Even a fairly radical (M4A) platform could attract a broad following. The whole truth, of course, is that any successful reform of our dysfunctional healthcare-industrial complex will have to rely much more on reducing total healthcare spending than on pushing more of this cost onto big employers and other "plutocrats." Overall top-down cost reduction, in fact, is probably the best argument that a single payer has going for it. But you're not going to hear many progressives emphasize that part--at least, not until after they're elected.

• Both American and European Millennials tend to lean progressive, but European Millennials are less receptive to economic redistribution. The authors of this essay contend that the gap stems from the fact that many Millennials across Europe already live in socialized economies and have found that the benefits flow more to the old than to the young. (The Atlantic)
• NH: Once again, Niall Ferguson et al. coauthor a long essay on generational politics for The Atlantic (see "Generational Division the Deepest Divide in American Politics"), only this time they look at Europe rather than America. It's a deep and substantive piece, definitely worth reading. But, once again, Ferguson indulges in too many broad generalizations about "left" versus "right," a dichotomy he obsesses about. He would have done better to stick to the facts.
• And the facts are these. Millennial voters in America and (to some extent) the UK are drawn to a populism that embraces a much bigger fiscal and redistributive role for a national government. Yet Millennial voters in continental Europe don't share this enthusiasm. The most obvious reason, of course, is that public spending as a share of GDP in most of these economies can't realistically be pushed any higher--and that most of this spending goes to supporting the elderly, Even when suffering from high unemployment in the aftermath of the GFC, Millennials discovered, there was little left over to spend on them.
• In every country surveyed by Eurobarometer in 2018, the young were least likely to support "raising taxes on the rich to support the poor" and most likely to agree that poverty is the result of "laziness or lack of willpower." (See chart below; one survey is marked in bars, the other in dots.)
• This, I think, is the most interesting takeaway from the essay. Americans still tend to think of fiscal largesse as a free lunch. Europeans view it more as a zero-sum game: What goes more to you goes less to me. That's why many European Millennials think more about young-old trade-offs between generations than about rich-poor trade-offs between social classes.
• In recent years, we have seen European Millennials shift politically in several directions. In most central and southern Europe nations, many are moving to growing populist parties on the right. In northern and western Europe, many are moving either to the Greens (with their focus on environmental stewardship and pan-European unity) or to the newly strengthening Liberal parties (with their focus on markets, technocracy, and shared civic sacrifice). Few, though, are gravitating to the Social Democrats or the parties of the old Marxist Left.

• The number of international migrants has hit 272 million and is now growing faster than the world’s population. Refugees and asylum seekers account for almost a quarter of the global increase since 2010. (U.N. Department of Economic and Social Affairs)
• NH: It's hard to know what to make of this number since it encompasses so many disparate situations. It includes the employee who was effortlessly transferred from Austria to Germany. It also includes the refugee family that escaped from Syria with nothing and now lives in Montreal. Anyway, this figure, for what it's worth, today amounts to about 3.5% of the global population, up from about 2.8% in 2000 and 2.9% in 1990.
  
• More controversial is the number of "displaced persons"--that is, people who have been more or less forced to leave their homes. According to the UN, the total displaced number--including those still living in their home country--is 71 million, or about 0.9% of the global population. But this is a very broad definition of displaced (it includes, for example, all Palestinians). If you're looking just at forcibly displaced people living outside their home countries ("refugees"), the number is 21 million. Both these numbers have been rising in recent years, especially after the recent national crises in Syria, Central America, Venezuela, and the Dem. Rep. of the Congo.
• The NYT says with alarm that the number of displaced people is the highest since World War II. That's hard to say since we have no good data for the early postwar decades.
• But we can say, absolutely, it is less than World War II and its immediate aftermath. It is so much less, in fact, that the comparison hardly makes sense. Let's not even try to count internal displacements caused by World War II, since the number left homeless by total global war were simply beyond enumeration. Let's just count refugees. Forced migrations in Europe, Russia, China, and India during the 1940s created some 100 million refugees, or about 4.0% of the global population in 1945. Today's 21 million translates into less than 0.3% of the global population in 2018. So yes, it's less. 

DID YOU KNOW?

The Amazing Disappearing CEO. What do WeWork, Juul, Nissan, and eBay have in common? Their CEOs all recently stepped down—and they’re following record numbers of executives out the door. According to outplacement firm Challenger, Gray & Christmas, U.S.-based companies announced 159 CEO changes in August, 28% higher than the number of exits in July and the most ever in a month. In the first eight months of 2019, 1,009 CEOs left their posts—the highest number for this period since the company began tracking data in 2002. Previously, the year with the most CEO turnover was 2008. This time, a bad economy isn’t to blame. Though businesses are facing plenty of economic uncertainty, a bigger contributor is increasing pressure from company boards, who are becoming less tolerant of lackluster performance and more readily holding CEOs accountable for scandals or personal missteps. Combine this with a flood of Boomers reaching retirement age, and you get an unprecedented level of executive turnover.