FORTUNE — While the increasingly complex jobs report gets picked apart each month for its myriad indicators — wage growth, ranks of the long-term unemployed, job growth by sector, labor force participation rate and more — one number that often gets overlooked is the most critical for our housing sector, and it’s not construction industry employment: It’s the employment number for young adults, the percent of 25- to 34-year-olds who have jobs.
So says Jed Kolko, Trulia’s chief economist and vice president of analytics. The reason is fairly logical, if you’ve been following the headlines (or if you’re the parent of someone this age): Too many members of this group are still living at home with mom and dad, suppressing the natural household formation cycle. The more of them who move out, the more new households will be formed, and the more homes will be bought or rented. And the more young people are employed, the more likely they are to move out.
Before the housing bubble, young adult employment hovered pretty consistently in the 78-80% range, Kolko points out. During the depths of the recession, it plunged to 73.5% and stayed there for much of 2011. (It had been “a disaster,” Kolko says.) It jumped up in 2012 to the 75% range and went up and down for a bit but has been basically “drunkenly staggering upward” since then, Kolko says.
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Last month, the employment rate for young adults showed the first real sign of improvement, ticking upward to 75.9% from 75.4% the year earlier. And while that might not seem like much of a move, each percentage point represents 400,000 people — and that increase marks the highest level the figure has hit in five years.
Each new twentysomething household, of course, means more IKEA sofas, West Elm sheet sets, espresso makers, kegerators, and the like. They need not buy a home to move the needle: They represent a large share of first-time homebuyers, but even as renters the newly launched will spend to “set up house,” as Kolko says. The most important thing is that they simply get out from under the comfortable confines of chez mom and dad — and having a job makes it way more likely that they’ll do that. Only 12% of this age group who have jobs live at home, where 20% of the unemployed do.
Record numbers of this group shacked up with their parents in the wake of the recession — 31.6% of 18- to 34-year-olds (this metric defines the age group slightly differently) were living with their parents in 2012, a post-recession high (remember that New Yorker cover?). That figure has fallen to 31.3% as of March 2013, the last available figure, but it’s still far above the pre-bubble norm: From 2000 to 2005 the figure was roughly 27%.
The data’s a little flawed for a few reasons — for example, if someone is in school and lives in a dorm for most of the year but lives at home in the summer, that person is counted as living with his or her parents. And other factors may drive this generation’s propensity to homestay — the remnants of helicopter parenting, for instance, which has both made living at home not just tolerated but in many cases embraced by parents. As well, so many of them are living at home that it’s also lessened the overall stigma associated with it. But those societal changes, Kolko says, tend to move very slowly, only impacting the numbers significantly over long periods of time. The big shifts in the numbers we’ve seen in the past few years, he says, are driven by economics.
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Even with the increase, don’t expect a shift in the housing market immediately. It takes a while for the young adult employment rate to significantly move the household formation figures — “You don’t get a job one day and then move out the next,” says Kolko. The job market will need to improve for young adults before they contribute significantly to the housing market. “But it would be hard to get a lot of new household formation without a better jobs picture,” he says.
Ironically, Kolko points out, an improvement in the job market may result in a decline in the actual home ownership rate for this group. Since so many are likely to rent first then buy, it means that the economy will be adding young renters faster than young owners — and just by virtue of being counted, as these twentysomethings wake up and stumble into the housing market, they may depress the rate a bit (just as when more people enter the labor force who weren’t previously looking for work, the unemployment rate goes up).
The employment figure for young adults is a volatile one based on a small sample, so the month-to-month change matters less than the general trend, Kolko says. But the fact that the percentage is now hovering in the 75s instead of the 73s, he says, means there are close to a million more adults working — and the number is moving in the right direction. Simply speaking, Kolko says, “we have an unusually high share of young adults who may be on the verge of moving out.”
Retailers: Time to think about stocking up on the kegerators.
