Millennials Are Playing the Hand They Were Dealt

The first members of the Millennial generation were born in 1980. The last were born in 2000, creating a cohort aged 16 through 36.  This young American generation has needs similar to those of earlier generations, but they missed some of the opportunities that helped the Boomers and Generation Xers.  Advantages that were unavailable to Millennials include periods of well-paying jobs, jobs for those lacking college graduation, low-cost college education and decades of good yields from home ownership.  Lacking these advantages, Millennials faced higher student debt and fewer choices for employment. Those financial strains encouraged a preference for urban living and led to delays in saving for retirement and home ownership.

Millennials were in a bleak job market during 2009 through 2011, a time when unemployment for all workers was regularly above 9%.  Job prospects have improved.  By November 2015, Millennials aged 16 to 19 had an unemployment rate of 15.7%, those aged 20 to 24 faced a 9.6% rate, but Millennials aged 25 to 34 experienced a tame 5.5% rate.  The recession seems to have influenced their participation rate.  In 2014, among those aged 16 to 19, 59.5 % were attending school and not looking for work.  In contrast, a decade earlier, just 46.1% of that age group was attending school.  School is a way for Millennials to avoid poor job choices both now and later.

Among working Millennials aged 15 to 34, the estimated median income in 2014 was $49,414, a level close to the all-ages median household income of $53,657. In the last few years, working Millennials are experiencing the economic recovery at a pace similar to older groups.

During 2013, Millennial households (i.e. those with head of household aged below 35) had a median net worth of $10,300, and an average net worth of $76,000. That suggests that Millennials with typical income and net worth probably have insufficient assets to qualify for home mortgages at attractive interest rates.  Millennials are aware that social security funds may be exhausted when they reach retirement age, yet they put aside little for retirement.

The burden of college loans weighs heavily on college students who did not graduate or who graduated into fields with scant employment.  Employed graduates generally can handle the student loans, even if the loans delay plans for homes, cars and other expenditures that Millennials eventually want.  About one-third of millennials have no intention of buying a car.  That makes commuting to employment from suburbs challenging and it is consistent with favoring urban rentals and public transit.

Millennials’ tendency to rent rather than own a home distinguishes them from older generations.  Among the US population above age 44, only 23% live in rented accommodations, but among those below age 30, the rate doubles to 46%.  Over a 43-year period, the average age of first home buyers has been fairly steady in the range of 29 to 33 years old, but during the sluggish recovery from the 2008 recession, first-time home buyers have delayed making a house purchase by an additional 6 years.  The reasons for their rental preference are their financial situation and their affinity for security and stability.

Millennials have access to insured health care at a slightly lesser rate than the rest of the population.  Health insurance coverage is in place for 82.9% of those aged 19 to 25 and for 81.8% of those aged 26 to 34. The Affordable Care Act provision for minors to be covered by their parent’s health care insurance until age 26 no doubt boosted coverage for young Millennials.

Millennials have at least 25 more working years before they retire.  During that quarter century, we can expect many will buy that first home and buy a car (perhaps reluctantly) and move out of urban housing.

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