Recession Slams Millennials – Again

Several young adults in my life have been derailed by the COVID-19 recession.

A few examples. My daughter-in-law just finished her graduate degree in occupational therapy and sailed through her certification only to be met by a stalled job market. A friend’s daughter, fresh out of nursing school, has already been turned down for one job. My nephew, a late bloomer who had finally snared a job making jewelry for a major retailer, was laid off and is floundering again.

Student loans, the Great Recession, and now a pandemic – Millennials can’t seem to catch a break.

Going into this pandemic, people in their 20s and 30s already had lower wages, more student debt, and less wealth than previous generations at the same age. This recession arrives at a critical time when Millennials were trying to catch up, build careers and strive for financial goals.

For the youngest ones, this is their first recession. But the downturn is the second blow for older Millennials, many of whom had the bad luck of entering the job market in the midst of the Great Recession a decade ago.

Does this double jeopardy put them in danger of becoming “a lost generation”? Millennials’ predicament prompted the Federal Reserve Bank of St. Louis to ask this question in a new report on their finances.

The COVID-19 recession, the report said, “could upend many of their lives.”

The situation is far from hopeless, of course – they have several decades to make up for this rough patch! There’s no reason they can’t overcome the setbacks with some pluck and determination.

But this will require much more effort to pull off amid the highest unemployment rate since the Great Depression. The Federal Reserve estimates more than 5.5 million Millennials have become unemployed this year – African-Americans bore a disproportionate share of the layoffs.

Young adults were over-represented in the food service, hospitality, and leisure industries slammed by state shutdowns to control the pandemic. And as the recession plays out, Millennials, with their shorter tenures in the labor market, will continue to be vulnerable to layoffs.

Don’t forget about Generation Z either. The recession will be a tough period for its oldest members, who are just graduating from college and haven’t built up their resumés. They may be less appealing job candidates when so many experienced people are eager to work and willing to compromise on pay at a time of sky-high unemployment.

But Millennials, who out-number Gen-Z in the labor force, have the most to lose in this recession. Prior to the pandemic, the typical Millennial worker already had relatively lower earnings and less wealth than previous generations had at the same age.

In 2016, Millennials held $12,000 in wealth, according to the Federal Reserve report – one-third less than the comparable wealth levels for Generation X and Baby Boomers. The wealth number was even more discouraging for African-American Millennials: $1,300.

Millennials, the report said, are “the only generation to have fallen further behind” in the pre-pandemic recovery.

This seems all the more remarkable given that today’s young adults are more educated than any previous generation – but remember that college debt is a big reason for their financial woes.

Nearly half of Millennials borrowed money for college, which has had a domino effect on their finances and stalled life plans such as buying houses, marrying, having children, and saving for retirement. A 2018 study found that the young adults who are loan-free are able to save two times more than their counterparts paying off the debt.

The best thing Millennials have going for them is their energy and ingenuity – now they need a little bit of luck.

Read more blog posts in our ongoing coverage of COVID-19.

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here. This blog is supported by the Center for Retirement Research at Boston College.