The CQ: Will Millennials & Gen Z Show Recession Resilience?
Kirsten shares why young people are poised to show strength through the latest economic downturn.
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How Millennials & Gen Z Will Handle the Economic Downturn
Q: “What do you think about Gen Z and Millennial behavior in a recessionary environment given this looming potential economic downturn may be the first ‘normal’ recession that Gen Zs and many Millennials experience while of age / in the labor force? In many ways, these consumers displayed resilience throughout the pandemic crash—in what areas, if any, may that carry on or strengthen and in what areas may that dissipate?”
A: I agree that millennials and Gen Z displayed resilience through the trials of the pandemic, but disagree that this is the first “normal” recession for both cohorts. Many Millennials were adults looking for their first jobs during The Great Recession in 2008—not dissimilar to Gen Z today. In fact, I’d argue that The Great Recession is to Millennials what today’s recession is to Gen Z. Millennials are positioned to survive right now, and Gen Z behaviors are set to be shaped by the macroenvironment.
Let’s start with millennials, many of which were entering the workforce back in 2008 when the economy collapsed. With an unemployment rate peaking at 10% in October 2009, a lot of them also lost their jobs. Others struggled to find full-time jobs, or took jobs they didn’t want. This resulted in a generation that feels perpetually behind—in climbing the ladder at work, earnings, buying a house, starting a family, and building wealth. There was a distrust of the government and organizations after the big bank bailouts of 2008 that had ripple effects across the economy, and they were less likely to feel loyalty to any company—a departure from previous generations that sometimes stayed in jobs for decades. Millennials felt they needed to look out for themselves, developing a reputation for “entitled” behavior that may have been misperceived given the challenges of their environment. Many Millennials moved jobs rapidly in search of better pay and upward mobility. There was a flight to cities in search of better options. And even today—though Millennial wealth has doubled in about two years’ time during the pandemic—the generation is not nearly as well off as their parents. Millennials maintain just 7% of the nation’s wealth, whereas Baby Boomers held 22% of the country’s wealth when they were the exact same age.
Recessions are certainly a test of mettle and an impressionable period, and The Great Recession contributed to instilling Millennials with behaviors that they maintain today. Most Millennials only stay in a role for 2 years and 9 months on average—far less than Gen X at 5 years and 2 months, or Boomers at 8 years and 3 months. Less than three out of 10 Millennial workers feel emotionally or behaviorally connected to their job, and 60% are open to new opportunities. Perhaps most importantly, with their wealth of experience navigating economic trials, 56% of Millennials feel confident they’ll be able to protect their finances and make smart money decisions—far more than other generations. They adapt to survive, and who can blame them?
Gen Z will be similarly shaped by their coming-of-age environment. The current pending recession, however, will be driven by entirely unique circumstances that most likely will influence unique behaviors—some of which are starting to come into focus after two years of heavy turmoil. There’s almost an air of rebellion similar to the hippie movement following the Vietnam War in the 60s and 70s. Gen Z people are questioning why things are the way they are, and how things really should be. According to Forerunner research, the younger generation is pessimistic about the future, which has prompted a crafty sense of wanting to get ahead. They are less focused on meaning at work and more focused on balanced lifestyles, with unique career paths very much an option. Their relationship with money is changing, having experienced the ups, downs, and fears of the pandemic, as well as being bolstered by stimulus checks. According to 2022 data, the top job consideration for Gen Z candidates is higher pay. By contrast, millennials, who dealt with job loss during The Great Recession, cited career progression and personal growth as their top work values back in 2011.
Gen Z has plenty of opportunity to execute on this vision, too. Unlike Millennials’ first recession, the employment market has never been stronger during a downturn than it is today. For yet another month, the U.S. added more jobs in July, though it was expected to show signs of cooling. On top of this, there have never been more paths to financial freedom than there are today for digitally-savvy adults, as well as a host of flexible, remote/hybrid offerings. In our research, we discovered Gen Z people are more likely than average to want to work for themselves—however, many are now realizing just how hard that is to sustain without the proper infrastructure, tools, and drive. They share Millennials’ angst from more than a decade ago, but they maintain certain advantages that the elder generation did not have. Gen Z was recently spending up to roughly 125% that of pre-pandemic levels—and we expect this to largely sustain, because: 1) they still have jobs and job options, and can afford it; 2) they’ve been isolated for too long, and they’ve been unable to enjoy the balance in life they so desire, like travel and dining out with friends; and 3) they feel a greater sense of maximizing the moment and—arguably naively—letting the consequences play out.
In the end, Millennials have built resilience and Gen Zs are trying to maximize the advantages they have, but they both stand to sustain through these volatile times. More than anything, I’m curious to watch the evolution of their behaviors beyond this short-term recession—which will no doubt impact their trajectories. Recessions always do.
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“You think about growth, it’s actually been synonymous with acquisition over the last decade; people were spending money to acquire customers. There was very little focus on loyalty and on retention. I think we’re going to see the next generation of brands be successful by focusing on that. Acquisition is table stakes now. You have to figure out a way to do that — there’s always going to be new channels that you can try, and you want to be first to those and try to create an advantage. But that’s table stakes. Where you’re really going to differentiate yourself is focusing on the customers that you have, caring about them as much as you care about the customers that you hope to have and acquire. And that’s where you’re going to break out. And it changes the economics of the business.”
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Home prices continue to hit new highs, with median home prices rising 10%+ in 80% of the U.S.’s 185 metro regions in the second quarter of 2022.
It’s not just hard to buy a house right now; it’s hard to rent one, too. While the affordability crisis in the U.S. is not new, it has snowballed over the past year as people have returned to big cities and housing options have become tighter amid a boom of new residents. Renters across cities and income brackets are struggling to find new homes or pay for the ones they already live in.
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Kirsten will be speaking about the future of e-commerce at WSJ Tech Live on October 24th, in an event that brings together leaders like Disney CEO Bob Chapek, Intel CEO Pat Gelsinger, and Sequoia Managing Partner Roelof Botha. Learn more here.
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