The CQ: Why We Are Spending So Much & One Reason Gen Z is Still on Facebook
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By Forerunner
What We’re Talking About on Slack:
Time uncovers the reason why we’re spending so much money: frictionless transactions that are making it so easy to pay for anything and everything that we hardly feel it. Which may account for why consumer spending has skyrocketed in the face of high inflation and high interest rates. Consumers have become much more comfortable paying digitally. In 2019, only 46% of people had paid for something through a phone or computer; by 2023 that number jumped to 73%. A different 2023 survey showed that more than 53% of Americans used digital wallets more often than traditional payment methods. Yet another study from last year tracked spending of one mobile payment service and found that credit card transaction amounts increased by 9.4% once people could use a mobile device, while the frequency of transactions increased by 10.7%. This has led many Americans to spend beyond their means, and it’s become increasingly difficult to keep track of where the money goes. “The rise of digital payment systems like Apple Pay and Buy Now Pay Later ‘creates this scattered universe of different payment options that can lead to overspending and financial instability.’”
What Gen Z will lose if they don’t have friendships at work. With remote work, there’s less time spent in the office, so there’s less opportunity to form bonds with coworkers. According to a survey, people 51 years or older were twice as likely to have met at least one friend at work than people under 30. “Removing the social aspect of work further encourages remote workers to keep their jobs at arm’s length. This detachment could have the twin effects of maintaining a better work-life balance, but leave workers lonelier than they would be had they made office friends.” Adding to that is the low unemployment rate that is encouraging young workers to consider other options instead of staying in one job for years—reinforcing the idea of ‘why bother making friends at work?’
U.S. core inflation tops forecasts again, reinforcing Fed caution. The core consumer price index, for items like used cars, air travel, and clothes, increased 0.4% from January and 3.8% from a year ago. Core CPI over the past three months rose an annualized 4.2%, the most since June. “This will probably be seen as a reason to keep policy on hold a while longer. Through the volatility, the downtrend in inflation seems to be leveling off and the Fed would like to see it continue to move lower before easing rates,” says a Charles Schwab strategist.
Homebuyers need to earn 80% more than in 2020 to afford a house in this market—and it’s not just because of mortgage rates. Four years ago, a household earning $59,000 a year could afford a new mortgage without spending more than 30% of their monthly income and with a 10% down payment. Today, the typical household makes about $81,000 a year (up from $66,000 in 2020), however homebuyers would still need to make about $106,500 a year to be able to afford the average home. “Since January of 2020, the typical mortgage payment on the typical home in the U.S. has nearly doubled,” says an economist at Zillow. Low housing supply is also keeping real estate prices high. Lowering the barriers for builders by easing land-use and zoning regulations would help increase housing options, but local policymakers would need to be open to doing that.
More Americans are treating their 401(k)s like cash machines. A strong stock market and the popularity of corporate automatic enrollment programs has led to a record number of 401(k) account holders feeling more comfortable about withdrawing money early for financial emergencies. According to one investment management firm, 3.6% of its plan participants withdrew money early last year, compared to 2.8% in 2022 and an average of about 2% before the pandemic. The IRS allows early withdrawals for hardship-related reasons (at a penalty). Almost 40% of those who took a hardship distribution last year did so to avoid foreclosure. In 2022, the percentage was 36%. In 2023, more than 75% of hardship distributions totaled $5,000 or less.
One big reason Gen Z is still on Facebook: to save money. The deals that could be found on secondhand goods posted on Facebook Marketplace are appealing to a generation that’s not only environmentally conscious but doesn’t have much disposable income. While Meta hasn’t divulged stats on how many Gen Z’ers use it, Marketplace has over a billion monthly active users and is only second in popularity to eBay. One thing that sets it apart from Craigslist, which was a go-to for older generations, is that buyers and sellers have profiles on Marketplace with ratings that make them more trustworthy. And because messaging is built-in on Facebook, communicating is easy. “The platform’s remarkable success is largely due to the trust users place in it, which is a result of its unique connection to Facebook’s social network.”
Dating apps have hit a wall. Can they turn things around? The biggest players in the industry, Match Group and Bumble, have lost more than $40 billion in market value since 2021. Part of the problem is that as many millennials have grown older and paired up, they no longer have a need for a dating app. Younger people may swipe casually, but there’s not enough of them who are willing to pay subscriptions for a dating app—in fact, many of them would consider that an “ick,” preferring instead to meet people in person or through DMs on Instagram or Snapchat. “I think what we’re seeing is purely a demographic shift.”
Amid explosive demand, America is running out of power. Areas of the U.S. are facing a credible threat of running low on power due to innovations in AI, which are driving up the demand for computing infrastructure that requires much more power than traditional data centers. Another factor is the transition to clean energy, which is increasing the reliance on the already-strained power grid to fuel EVs, induction stoves, and other appliances to reach the government’s climate goals. “When you look at the numbers, it is staggering. It makes you scratch your head and wonder how we ended up in this situation. How were the projections that far off? This has created a challenge like we have never seen before.”
Why we’re willing to spend more on beauty products than ever before. A McKinsey report predicts that the luxury beauty industry could grow from around $20 billion today to $40 billion by 2027. Even though luxury cosmetics have gotten more expensive, they still offer “an accessible level of opulence.” And mini versions of prestige products—of which U.S. sales have increased by 16% in the last year—make attaining luxury even more doable. High-end beauty brands, like Westman Atelier and Fara Homidi, have been able to gain a strong following because of their use of luxe, decorative packaging that lends itself to Instagram fodder, plus their founders are make-up artist personalities who can educate their customers. “When Westman showcases on social media the products she uses on clients Gwyneth Paltrow and Anne Hathaway, for example, the company sees sales increase. Because of this strategy, the company hasn’t had to pay influencers to market its products.”
A new report from Pew Research Center found that about1 in 4 teens say they spend too much time on their phones. Nearly 40% of kids ages 13 to 17 say they have cut back on their time on social media and their phones. Also interesting: Roughly three-quarters say they feel happy or peaceful when they don’t have their smartphone. Still, the survey showed that 70% of teenagers believe that the benefits of smartphones outweigh the harms for people their age, even though 42% say that smartphones make developing good social skills harder.
Portfolio Highlights:
The New York Times profiles Wonder founder and CEO Marc Lore on how he is building a brand that lasts.
Henley Vazquez, the CEO and co-founder of Fora, talks the future of travel with Conde Nast Traveler’s Arati Menon and Mary Celeste Beall of Blackberry Farm.
Kyle Leahy, CEO of Glossier, discusses disrupting the marketing playbook on the CreatorIQ podcast. Meanwhile Cati Brunell-Brutman, Glossier’s CX Manager, visits the Juice with Jess podcast.
Oura adds Pregnancy Insights to its list of features. CNN, TechCrunch, The Verge, PYMNTS, CNET, and Business of Fashion also cover the brand’s launch on Amazon.
Forbes names Ritual's Protein Powder "Best Overall." Trendhunter covers Ritual’s launch of stress-relieving capsules.