The millennial generation, those born between about 1981 and 2000, has finally come of age. Older millennials are beginning to reach their peak earning years, starting families and buying homes. Younger millennials are only a few years from exiting college and entering the workforce. And the millennial generation has finally become the largest generational cohort in existence, outnumbering baby boomers. But their impact on the US economy may not be nearly as beneficial as that of boomers and Gen-Xers.
Financial media is full of articles about how millennials are incredibly indebted, much more so than previous generations. Student debt in particular afflicts millennials to a greater extent than previous generations, with most millennials taking on student debt in order to pay for college. The average millennial ends up leaving college with tens of thousands of dollars in student debt, which dramatically affects the types of jobs they take and their ability to get married, buy a house, and perform any of the other markers of adult life.
It’s probably no surprise then that millennials are marrying later, having children later, and buying houses later in life than previous generations. That has a dramatic effect on family development, as well as on the housing market. It has become clear that millennials just won’t be able to afford the elevated housing prices that pervade the US market. Only those with very well-paying jobs or who get significant assistance from their families are able to buy houses right now.
Millennials also aren’t the huge boon to consumer spending that many companies had hoped as, despite their large numbers, their levels of indebtedness keep them from being able to engage in the same levels of spending as boomers and Gen-Xers. With so much of the US economy being dependent upon consumer spending for growth, that could have severe negative repercussions for the future growth of the US economy.
The massive amounts of debt that the Federal Reserve has incentivized people to take on through its loose monetary policy is finally coming home to roost. While boomers and Gen-Xers may have taken on massive amounts of debt to finance home purchases, they at least have been able to pay off their loans. Millennials have not been so lucky, and if this current trend continues then future generations could be even worse off.
