Eco­nomic mus­cle

Young adults eclipse boomers, but when will they be able to spend?

The Dallas Morning News - - BUSINESS - By SH­ERYL JEAN Staff Writer sjean@dal­las­news.com

Mil­len­ni­als will have a pro­found eco­nomic im­pact, but the full ex­tent will be de­layed be­cause of heavy stu­dent loan debts and other fac­tors.

Megan Lyons gave up a cor­po­rate job to fol­low her pas­sion. The 30-year-old, who launched her fit­ness and nu­tri­tion coach­ing busi­ness 16 months ago, now has a wait­ing list of clients and is on track to earn six fig­ures this year.

Jane LeBlanc has two de­grees but has not been able to find a per­ma­nent job in the last seven years. The 33-year-old Den­ton res­i­dent works as a tem­po­rary proof­reader and free­lancer.

The two women stand at op­po­site ends of the em­ploy­ment spec­trum, but they have one trait in com­mon: They’re mil­len­ni­als

— 18- to 34-year-olds who make up the largest, most di­verse gen­er­a­tion in Amer­ica.

The roughly 74 mil­lion mil­len­ni­als, in­clud­ing 6.3 mil­lion in Texas, will have a pro­found eco­nomic ef­fect as more baby boomers re­tire. They’ll spend more money on new tech­nol­ogy, they’ll start the next Google, and they’ll be­come the main bread­win­ners for their fam­i­lies.

But some of their dis­tinct char­ac­ter­is­tics may de­lay their full im­pact. Mil­len­ni­als — also called Gen­er­a­tion Y — tend to be highly ed­u­cated but bur­dened by stu­dent loans. Many are un­em­ployed or un­der­em­ployed.

They also are wait­ing longer to marry, have kids and buy a home or a car. Many still live with their par­ents.

“You have this big gen­er­a­tion — big­ger than the baby boomers now — and they have the po­ten­tial to buy cars, buy houses, and the num­bers do mat­ter,” said Sarah Watt House, an econ­o­mist for Wells Fargo who stud­ies mil­len­ni­als. “Look around the world: One of the rea­sons Ja­pan is re­ally strug­gling is that their pop­u­la­tion is not only aging, but de­clin­ing.”

Un­like pre­vi­ous gen­er­a­tions, mil­len­ni­als face a tough climb up the eco­nomic lad­der. Younger mil­len­ni­als (ages 18 to 25) en­tered the work­force dur­ing the re­ces­sion, com­pli­cat­ing their ef­forts to find a job and post­pon­ing their peak buy­ing power for years.

Es­ti­mates of mil­len­ni­als’ pur­chas­ing power vary widely, but a U.S. Cham­ber of Com­merce re­port put their an­nual spend­ing at $200 bil­lion — a frac­tion the size of the $1.2 tril­lion U.S. His­panic con­sumer mar­ket.

So far, mil­len­ni­als have been more of an eco­nomic drag than a driver, but that could change as the econ­omy and em­ploy­ment op­por­tu­ni­ties con­tinue to im­prove.

Mil­lions out of work

Last year, nearly 5 mil­lion mil­len­ni­als were out of work across the U.S., in­clud­ing about 344,000 in Texas. They made up half of the un­em­ployed peo­ple in Texas and the na­tion, the most of any age group.

The un­em­ploy­ment rate for mil­len­ni­als is much higher than for other age groups, and it ticked up in March. More than 10 per­cent of peo­ple ages 20 to 24 were out of work vs. 5.6 per­cent for those 25 to 34 and 5.5 per­cent for all work­ers.

The re­al­ity may be worse be­cause statis­tics of­ten don’t re­flect peo­ple “with a de­gree who are work­ing full time at Star­bucks,” House said.

Take LeBlanc. Though armed with a bach­e­lor’s de­gree in tech­ni­cal writ­ing and a mas­ter’s in jour­nal­ism, she can’t find a per­ma­nent job. She works at least 40 hours a week as a tem­po­rary proof­reader for a Big Four ac­count­ing firm in Dal­las and writes for the Dal­las Ob­server on the side.

“I make enough as a temp to live on, but I would like to be a per­ma­nent em­ployee some­where,” said LeBlanc, who owes about $47,000 on stu­dent loans. “It’s been a very long time since I was per­ma­nent.”

Since the re­ces­sion be­gan in 2007, more mil­len­ni­als have moved into lower-pay­ing jobs, such as at ho­tels and restau­rants, and fewer work in high­er­pay­ing jobs in fi­nan­cial ser­vices and man­u­fac­tur­ing. Such shifts mean that me­dian house­hold in­comes for peo­ple un­der 35 are lower than be­fore the re­ces­sion.

The av­er­age mil­len­nial earned $33,883 in 2013, com­pared with $40,352 for work­ers of all ages, ac­cord­ing to data from the U.S. Cen­sus Bureau. In Texas, av­er­age pay for young work­ers was $31,663.

Roughly a quar­ter of mil­len­ni­als earned less than $25,000 a year, and only 7 per­cent made over $70,000, ac­cord­ing to a re­cent Fed­eral Re­serve sur­vey.

Cydni M. Robert­son is con­tent with the $42,000 a year she earns as a manager at a Belk depart­ment store in Dal­las, but she still has trou­ble mak­ing ends meet. Her house­hold ex­penses con­sume about half of her in­come when it should be closer to a third.

“Af­ter stu­dent loans, my car note and feed­ing my­self, there’s not much left,” the 24-year-old said. She rents an apart­ment in Car­roll­ton but plans to move in with her sis­ter in DeSoto next month to save money and build up a rainy day fund.

For six months, Robert­son paid $180 a month to whit­tle down $46,000 in stu­dent loan debt, but she just de­ferred pay­ments for a year be­cause it was “eat­ing me alive.”

Stu­dent debt bur­den

With dif­fi­culty find­ing work dur­ing and since the re­ces­sion, many mil­len­ni­als in­vested in higher ed­u­ca­tion.

They’re the most ed­u­cated Amer­i­can gen­er­a­tion, with about a quar­ter hav­ing at least a bach­e­lor’s de­gree. But that school­ing sent to­tal U.S. stu­dent debt bal­loon­ing to $1.3 tril­lion.

The av­er­age amount of stu­dent debt for col­lege grad­u­ates in 2013 was $28,400, up 2 per­cent from 2012, ac­cord­ing to the lat­est data from the In­sti­tute for Col­lege Ac­cess and Suc­cess.

“There’s so much out there about stu­dent debt, and a rea­son for that is they’re a re­ally well-ed­u­cated gen­er­a­tion,” said Katie Brewer, an in­de­pen­dent cer­ti­fied fi­nan­cial plan­ner in Gar­land who spe­cial­izes in mil­len­ni­als. “I see that as some­thing that will have a big im­pact go­ing for­ward.”

For now, mil­len­ni­als’ em­ploy­ment, in­come and debt strug­gles have kept many of them from buy­ing a home, a trend that echoes through the econ­omy. If you’re not buy­ing a home, you’re not pay­ing for a home war­ranty, movers, room­fuls of new fur­ni­ture or home re­pairs.

“Mil­len­ni­als are the first gen­er­a­tion to see home prices fall, and be­cause of that they’re afraid to buy houses, like in the Great De­pres­sion,” said Mark Dot­zour, chief econ­o­mist for Texas A&M Uni­ver­sity’s Real Es­tate Cen­ter.

Na­tion­ally, the num­ber of first-time home­buy­ers is down to 27 per­cent of all home­buy­ers, from about 40 per­cent be­fore 2007. It’s about the same in Texas, where the av­er­age home­buyer last year was 45 years old.

In ad­di­tion, about 30 per­cent of mil­len­ni­als — 22 mil­lion na­tion­ally and nearly 1.9 mil­lion in Texas — lived with a par­ent in 2013.

LeBlanc rents a du­plex with her 74-year-old god­mother who helped raise her. Last year, for fi­nan­cial rea­sons they had to sell a house they jointly owned, she said.

Of course, some mil­len­ni­als have bucked the trend and bought homes.

Lyons, 30, and her hus­band — who both made six-fig­ure salaries as con­sul­tants for a few years — saved to buy their first home in Dal­las in 2012.

“That was a big deal,” she said. “That’s the one thing in my life that makes me feel like an adult. I never spent close to that amount of money, and it was re­ally hard to wrap my head around.”

Run­ning be­hind

Over­all, low home­own­er­ship rates mean mil­len­ni­als are not build­ing home eq­uity and not ben­e­fit­ing from home price ap- pre­ci­a­tion.

The av­er­age young fam­ily’s wealth is $108,000, about a third be­low 2007 lev­els, ac­cord­ing to a re­port from the Fed­eral Re­serve Bank of St. Louis. Econ­o­mists say such a statis­tic is wor­ry­ing be­cause it can hurt a per­son’s abil­ity to bor­row, which leads to in­creased spend­ing.

Most mil­len­ni­als also aren’t sav­ing enough for an emer­gency or re­tire­ment, partly be­cause of their stu­dent debt bur­dens.

A re­cent sur­vey by Prin­ci­pal Fi­nan­cial Group found that nearly two-thirds of work­ers who are 23 to 35 started sav­ing for re­tire­ment be­fore they were 25, but less than one-third save 10 per­cent of their salary through an em­ployer-spon­sored plan.

Tay­lor Farmer of Irv­ing earns about $45,000 a year work­ing at her fam­ily’s printer and copier busi­ness. She sets aside about $4,000 for emer­gen­cies and wants to dou­ble that so she can start in­vest­ing, do­nate to char­i­ties and travel.

“Right now, I’m fo­cus­ing on my fi­nances and ca­reer,” the 24year-old said.

Todd Al­li­son, 33, earns a six-fig­ure salary as a man­age­ment con­sul­tant for Oliver Wy­man, which en­ables him to sock away some money. The Army vet­eran, who spent time in Iraq, mar­ried in 2007, bought a house in 2013 and be­came a fa­ther nine months ago.

Look­ing ahead

Like many mil­len­ni­als, how­ever, he looks at sav­ing in a dif­fer­ent way.

“We’re not sav­ing for re­tire­ment; we’re sav­ing for flex­i­bil­ity,” said Al­li­son, of Dal­las. “I have some goals to po­ten­tially do some­thing more ful­fill­ing along the way. The idea of wait­ing un­til re­tire­ment to do things doesn’t make sense.”

De­spite some strug­gles, many mil­len­ni­als are op­ti­mistic.

Nielsen found that 69 per­cent don’t think they earn enough to lead the life­style they want now, but 88 per­cent think they will in the fu­ture.

Other char­ac­ter­is­tics of mil­len­ni­als, such as their higher ed­u­ca­tion, should ben­e­fit them as the econ­omy im­proves and they land bet­ter jobs. As their fi­nan­cial sit­u­a­tion im­proves, Wells Fargo’s House ex­pects more of them to begin buy­ing homes and in­vest­ing.

Many mil­len­ni­als also feel strongly about vol­un­teer­ing and giv­ing back to their com­mu­nity — a so­cial im­pact that’s hard to quan­tify.

Farmer has started knit­ting hats for can­cer pa­tients. Lyons makes big an­nual char­i­ta­ble dona­tions and even makes hol­i­day gifts to causes dear to fam­ily mem­bers’ hearts.

Robert­son cre­ated a blog and char­ity event called “It’s her Strut” to raise aware­ness of self­es­teem is­sues among women and young girls.

“I’m ex­cited about my fu­ture,” Robert­son said. “I’m not ex­actly sure which di­rec­tion I want my ca­reer to take, but I’m learn­ing so much.”

Ash­ley Lan­dis/Staff Pho­tog­ra­pher

From left: Cydni M. Robert­son, Jane LeBlanc, Todd Al­li­son, Megan Lyons and Tay­lor Farmer rep­re­sent the mil­len­ni­als, whose eco­nomic im­pact is con­strained by stu­dent debts, em­ploy­ment woes and a ten­dency to wait longer to marry, buy houses and have kids.

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