08 December 2011

Labor Force Participation and Upside Down Mortgages

* Labor force participation has fallen dramatically in the 16-19 and significantly in the 20-24 age group in the last five years, mostly because these young adults choosing to stay in school during recession years when the job market looks bleak. Labor force participation is up in all age ranges 55 and up, however, as older Americans come to the realization that they can't afford to retire given that their nest eggs have been diminished by the financial crisis. Labor force participation for those aged 25-54 hasn't changed much in the last half decade.

In 1990, 1995 and 2000, most people aged 16-19 were in the labor force; in 2010 only about one in three are in labor force (and, of course, for those who are in the labor force, the unemployment rate is high).

* There are about 74.6 million households that live in homes that they own. About 22.6 million of them own their homes free and clear. About 52 million have mortgages, and about 10.7 million of those mortgages are upside down. Aggregate household net worth in the United States fell by $2.4 trillion in the third quarter and home equity was among the falling components. Aggregate mortgage debt is declining too, mostly, but not entirely due to foreclosures. More than 25 million households rent rather than own their homes.

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