Millennials kill industries because they’re poor: Fed report

Millennials are poorer
than earlier generations — and it’s making a massive
difference.
Eugenio
Marongiu/Shutterstock

• Millennial
  spending habits
  have wreaked havoc on companies from golf equipment
  makers to razor manufacturers. 
• However, a new paper from the Federal Reserve argues that
  millennials are similar to earlier generations except for one
  factor: they have much less money than Gen X and
  
  Baby Boomers had when they were young. 
• “Millennials are less well off than members of earlier
  generations when they were young, with lower earnings, fewer
  assets, and less wealth,” the report reads. “Conditional on their
  age and other factors, millennials do not appear to have
  preferences for consumption that differ significantly from those
  of earlier generations.” 

Millennials have been blamed for
killing plenty of industries. But, according to the Federal
Reserve, it’s not their fault. 

“A new Federal Reserve paper says the app-loving,
participation-trophy-receiving cohort, defined as those born
between 1981 and 1997, aren’t really different from their
parents,” Bloomberg’s
Luke Kawa reports. “They’re just poorer than previous
generations were at this point in their lives, thanks to a large
portion of the group coming of age during the financial crisis.”

Differences in spending between millennials and past generations,
the Federal Reserve report argues, are not primarily due to
“unique tastes and preferences.” Instead, authors Christopher
Kurz, Geng Li, and Daniel J. Vine point to general technological
changes, ongoing demographic evolution, and economic cycles as
explanations.

Most significantly, most millennials came of age during the Great
Recession, kneecapping their financial well-being in early years
of adulthood. 

Read more:

‘Psychologically scarred’ millennials are killing dozens of
industries — and it’s their parents’ fault

“Millennials are less well off than members of earlier
generations when they were young, with lower earnings, fewer
assets, and less wealth. … Conditional on their age and other
factors, millennials do not appear to have preferences for
consumption that differ significantly from those of earlier
generations,” the report reads. 

Average real labor earnings for male household heads working full
time were 18% and 27% higher for Generation X and Baby Boomers
when they were young compared to millennials. For young female
heads of household, the difference is smaller — 12% for Gen X and
24% for Boomers — but earlier generations were still making more
money when they were younger among similar demographics. 

Will millennials’ murder spree continue?

It remains to be seen if
economic recovery will change millennials’ spending
habits.
Tabatha
Fireman/Stringer/Getty

Millennials having less money to spend has
put pressure on various industries. Millennials are forced to
be choosier about what they buy, and certain purchases remain out
of reach. 

It remains to be seen whether economic recovery will eventually
correct these imbalances.

The authors of the Federal Reserve report argue that there is
“little evidence that millennial households have tastes and
preference for consumption that are lower than those of earlier
generations.” For example, millennials have started spending
similar amounts of money on cars to earlier generations now that
they aren’t as heavily burdened by the recession.  

However, other experts argue that the psychological impact of the
Great Recession may linger. 

“I think we have got a very significant psychological scar from
this great recession,”
Morgan Stanley analyst Kimberly Greenberger told Business Insider
in 2017.

“One in every five households at the time were severely
negatively impacted by that event,” Greenberger continued. “And,
if you think about the children in that house and how the length
and depth of that recession really impacted people, I think you
have an entire generation with permanently changed spending
habits.”