Now, it's true that more 18 to 24 year-olds are going to school full-time than before. And it's true, thanks to the quirks of the Census Bureau, that this explains some of the supposed rise of basement-dwelling millennials. But it's also true that, even if you exclude college students, there's been a big increase in young people living at home the past few years. You can see this in the chart below from Trulia's Jed Kolko. Just over half of non-students were crashing with mom and dad in 2012. It was 45 percent in 2007, before the Great Recession hit.
This is how a slump becomes self-perpetuating. Young people moved back home when the economy cratered, and stayed there when it didn't bounce back. There just weren't enough jobs, let alone well-paying ones, for them to afford to move out—especially if they had student loans to pay back. But all of these micro decisions to set up camp in their parents' basements had a macro effect: there wasn't as much demand for new housing. And that's been a big part of why the recovery has been so underwhelming.
In other words, because millennials couldn't afford to live on their own, the economy stayed stuck—and so did they.
The good news, though, is that this might finally be changing. Job growth is picking up enough that millennials are starting to venture out on their own. That, in turn, creates demand for new apartments, which sets off a new virtuous cycle of spending and hiring.
The kids have always been all right. Now the economy almost is, too.