The Economy's Impact on Young Consumers

Every consumer, no matter their age or race, is currently impacted in some way by today’s economy. During our June 2022 Market Pulse webinar, presenter Jeff Jensen, Vice President at Keybridge went over the recent economic trends currently happening with a macro-economic update and how these trends are impacting young consumers. Below is a recap highlighting the key economic updates Jensen presented. For more, watch our full webinar recording here. 

Inflation continues to climb

Even though inflation peaked in March, that does not mean that it will not continue to climb more for the second half of 2022. Presenter Jensen from Keybridge explained by sharing with the audience the Keybridge “25 to watch'' inflation index which included the following:  

• Rent
• Owner’s equivalent rent 
• Wireless telephone service
• Limited-service restaurants
• Insurance
• Electricity
• Trash collection/water
• Groceries
• Financial services
• Veterinarian services
• Boys and girls clothing
• Household operations 

The inflation index Keybridge provides suggests that structural inflation will continue to rise, which is something people should be keeping in mind for the future, as you can see in Figure 1. 

Supply chain has definitely been the main cause of inflation moving upwards. That is why many are asking what is happening now and will it get better? Jensen went over  the supplier deliveries index, shown in Figure 2. The supplier's industry index essentially measures the number of things that are late and how late they are. Starting in 2020, we saw a big spike and things have gotten better since then. It is better than in 2021, yet the issue is that we are still far above where we would normally be in terms of that index. 

Next, Jensen went over the global supply chain pressure index, shown below, which is a new metric from the New York Federal Government. It is an all-in-one measurement of the supply chain. When looking at the graph, one can see supply chain has never been an issue for the last 25 years until the pandemic. 

When it comes to consumer sentiment or consumer confidence, inflation is driving it down. On the left side of Figure 3, you can see how consumer sentiment is doing and how it coincides the majority of the time with recessions. However, on the right when you put consumer sentiment on the same chart as inflation, you can see when inflation gets high it matters a lot more for consumer sentiment then when inflation gets lower. To reiterate, when inflation is lower the relationship with consumer sentiment becomes stronger. Currently, inflation is the key. It is the only thing that is affecting our economy as a whole. 

Are tougher times ahead for young consumers? 

When it comes to the tight labor market, young people are benefitting. Young people have a higher unemployment rate but their wage growth is faster. Currently, the advantage of younger employees has gotten a lot more significant over the last few months which is shown in Figure 4. This is different than usual, as the majority of the time young people are hit hard during a recession. However, there is still financial stress going on for everyone no matter their age. Financial stress is continuing to rise and many consumers are starting to expect they will miss a payment, especially people under forty. 

Student loans are another concern. However, the largest part of overall debt is due to mortgages. Student loans are about 10% of overall debt. More than 60% of that student loan debt is held by people under forty. That is why student loan debt is causing a lot of financial stress for younger consumers. 

Traditionally, homeownership rates for under 35 years old has been rising. Housing has become increasingly unaffordable for young consumers. That being said, it is going to be harder for younger consumers to afford housing. However, younger consumers have been punching above their wage rate, which can hopefully overall help them in the future. 

For more information and insights on the U.S. Economy and the latest consumer credit trends, download our presentation deck or watch our June 9 webinar recording. And if you would like to attend our next Market Pulse webinar on how student loans are impacting the consumer wallet, you can register here. 

 

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