How Millennials Impact the US Economy

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America’s largest generation faces a tough economic climate.

By Harry Dent, Economy & Markets Daily:

I have three step kids. Two are generation X. The youngest is generation Y. Just looking at them, you can tell a clear difference in their personalities and aspirations. My older step kids are more individualistic. The younger one is more oriented to the group and collective interests.

It’s a fundamental difference that speaks by-and-large to both generations. And it’s a difference we need to understand given the troublesome economic climate we face.

You know that one of the major points of my research is that the millennial generation will neither fully replace nor surpass the boomers the way every single generation in history has before (not to mention the millennials are much smaller in most developed countries).

This is something most can’t wrap their head around, because the millennial generation is indeed larger than the boomers.

But they’re larger only in terms of total numbers. They started out with higher birth rates and their birth surge lasted longer. However, they never have peaks in births, adjusted for immigration, quite as high as the baby boom. In other words, this generation will never take us to new heights in stocks, in home buying or car buying or most sectors of our economy!

And that is more critical for their future economic impact.

The chart below comes from the seminal book Generations by William Strauss and Neil Howe. It shows how there are four broad personality types that emerge in two birth waves every 80 years or so. Here’s another point about generations most people don’t get. Strauss and Howe went back centuries to document their findings. Their research adds a social/political dimension to the economic cycles we’ve identified.

The Alternating Cycle of Generations

What this shows is that for every birth wave that is more individualistic, inner-directed, or me-oriented… another follows that is more conformist, outer-directed, or we-oriented. And each wave changes as it rises and falls.

At the start of the individualistic generation comes a rising and more dominant “idealist” group. In our case, this is the baby boomers, and the Henry Ford generation before them.

Then comes a declining “reactive” group, like generation X.

The idealists want to change the world radically. Throw out the baby with the bath water! Sex, drugs, and rock-and-roll! But they also bring about major revolutions like automobiles and personal computing.

Coming off that high, the reactives want to change the world and improve it in more practical terms, like with the Internet and global communities.

The civics follow in the next rising birth wave. This group is more collective. They’re all for the good of the whole. They were the Bob Hope generation, the World War II GIs that banded together in tough times. That is the same group as the millennials emerging today.

And when it comes down to it, these guys get the most stuff done due to their collective instincts. That’s why Tom Brokaw called them: “The Greatest Generation.”

The adaptives that follow them are also known as the “silents.” They’re collective like the civics, but they’re more obedient to societal norms. They’re “The Organization Man” in 1970s Corporate America – they believed groups made better decisions than individuals.

We’re in another silent generation now (though it hasn’t been named), starting in 2008 and rounding out in 2023, with declining births along the way.

A recent article in Investor’s Business Daily talked about the difference between these individualistic and conformist generations – specifically, our boomers and millennials.

It’s key that the “sharing economy” emerged with the more collective millennials. They’d rather share experiences and services, preferring to spend money hanging out with friends at a café over shopping at the department store. In other words – they value experiences over things. They value the collective over the individual.

Hence, department stores and malls have been declining for over a decade while restaurants and bars do better.

Unlike the boomers that grew up in the Happy Days of the 1950s, the millennials are more cautious, especially since 2008. They’re less likely to buy homes. More likely to rent or live with parents longer. And less likely to take on credit card debt. The Bob Hope generation, like them, never had the propensity for debt and risk-taking that the boomers to follow them did.

But – they spend more than ever on electronics and personal communication devices. Why? Those things allow them to connect with the collective, the group, the world.

They communicate heavily through the Internet and mobile devices, much more than aging boomers. They’d rather shop online at Amazon and have the world at their beck and call than shop at a brick-and-mortar store. They form communities of similar interests around the world, not just locally.

Again, they’re more interested in what’s in their pocket – their phone – than what they’re wearing. They don’t need to stand out and be as individualistic as the boomers.

So whatever business you are in or work for, understand that you need to be selling experiences more than things. Focus on collective association more than individuality.

And understand that your kids, like every generation, will be different from you as their parent (one reason why kids get along better with grandparents).

The Bob Hope generation fought their baby boomer children’s individuality. Boomers should not fight this new generation’s collective instincts.

What could be more important? In an increasingly global and polarized world created out of the extreme innovation and individuality of the last generation, we need their collective instincts to help balance things out. Everything runs in cycles.

After all – it will be up to the millennials, not the boomers, to bring us out of the ever more challenging economic winter season. And we are blessed to have one of the larger millennial generations to follow, compared to most of Europe and East Asia. By Harry Dent, author of the just updated bestseller, The Demographic Cliff. Find out how to get it for free here.

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  32 comments for “How Millennials Impact the US Economy

  1. Petunia
    October 13, 2015 at 6:10 pm

    I have a millennial at home and agree with much of what you say. They value experiences more than things because they have grown up surrounded by loss. We lost our home to the financial crisis and our son lived thru that with us. Now a grandparent is in hospice care and medicare wants to take their home. My son sees ownership in America as a big lie. He sees people who work hard lose everything over and over again. He is not interested in home ownership, financial instruments, or investing too heavily in any employer. This is the real cost of the financial ripoff in our country, a generation disengaged.

    • Think Positive
      October 13, 2015 at 6:55 pm

      Have you ever heard of the ‘Rent-Trap’?
      People that leave themselves exposed to investment goals of others.
      My daughter is escaping Brooklyn for a single house in NJ. Over 5 years rent went from $1,850 to 2,300 per month (800 sq feet) Her renewal would be 2,850!
      They’ve been working and saving and can lock-in a much lower housing cost for the rest of their lives.
      Please re-think you negativity.

      • Petunia
        October 14, 2015 at 8:00 am

        I have owned four houses and my husband has owned more. I enjoyed living in them, but overall, they have not been good investments. This is not counting the number of incoming producing opportunities my husband and I gave up because we were tied to a property. Looking back I was better off financially as a renter because of the mobility. Now that no one has job security, mobility is a big asset.

        • c smith
          October 14, 2015 at 8:27 am

          Houses are NOT an investment, but, if purchased at a reasonable price, can be a form of forced savings. Nothing more.

        • Invisible Hand
          October 18, 2015 at 7:51 pm

          Investing in housing only makes sense if you are free of all other debt (student, credit card, healthcare related) and have enough to put at least 20% down. Housing prices (at least in hot markets like CA) are above 2006 bubble highs. Although hot Chinese money has dried up, it’s probably better to wait for a correction, which is overdue, considering the foreclosure crisis.

          With ~10% closing costs, property taxes, maintenance, HOA fees, Insurance and no job security, is it any wonder that home ownership rates at at their lowest point in 3 decades?

          The days of real estate prices growing every year are over. It’s time to wake up and live a small footprint, and avoid falling into a trap where you owe banks for 30 days!

      • dentss dunnigan
        October 21, 2015 at 6:54 pm

        She bought a house in NJ ,the highest property taxed state ,she’ll wish she still renting when she sees her tax increases every ..

  2. Peterb
    October 13, 2015 at 6:23 pm

    Wasn’t Dent calling for the DOW to hit 40,000, or some such high number, back in 2004?

    • October 13, 2015 at 7:33 pm

      I think that was someone else (not me!). He’s famous for his crash calls – some of which he bases on demographics.

      • West
        October 13, 2015 at 8:02 pm

        Frankly Dent is onto something with the demographics. He’s just off on the timing. Also I wonder if he realizes that Gen-Y is a little bigger than the size of the boomer generation, so it + immigration should fill all the “shoes” so to speak.

        Boomers will need to sell their paid-off or underwater homes to downsize or pay their retirement expenses. For those with homes in the suburban regions, all signs point to the younger generation wanting a more urban way of life, hence infill and urban apartments. So who will those boomers sell their homes to?

        The second side of the coin, IF the millennials suddenly decide to decamp for the suburbs and live the same oil-driven, vehicle society their parents lived, how will they afford these (potentially) overpriced, expensive homes, given the lack of job options, job security, and over-indebtedness coming out of college?

        Personally I thought this trend would already be underway but the lack of home equity and people sitting waiting to get back to peak pricing has stalled this out a few years. I expect by 2025 this will be in full swing and if urban infill holds as it is looking now, there could be some major losses to be had in the suburban/exurban areas where boomers are being forced to sell into a market with few willing buyers.

      • rich black
        October 13, 2015 at 8:10 pm

        From Barron’s:

        “Dent is as comfortable calling for Dow 35,000, as he did 13 years ago, as he is forecasting Dow 3800 now.”

        • October 13, 2015 at 9:49 pm

          Thanks for digging it up!

        • Peterb
          October 14, 2015 at 9:55 am

          Thanks. I thought I’d seen that back around 2002.

          The latest poll shows boomers are not really looking to move and want to age in their homes , if they can. I see reverse mortgage being strongly marketed right now, indicating that this is probably the case. Kids like urban environments up until they want to have their own kids. Suburbia is far from dead.

    • Mark
      October 13, 2015 at 8:53 pm

      He has been advocating gloom and doom for years and gold to go sky high.
      Now he is saying DOW will go 4000 points.
      Even if it goes down to 4000 it will go up fast as bullet, so my only advice to all of you: Buy low and don’t be too greedy, use your own head and reasoning and you will be fine.
      From my own prospect stock outlook: Avoid gold stocks – unless you are day trader and ride the tide, some great buys are shaping in commodities and agriculture for patient investors. Avoid bank and insurance stocks short term and carefully explore biotech for some great buys.

  3. breadandcircuses
    October 13, 2015 at 6:30 pm

    Some of this is very apt, for instance that there is less of a need amongst millennials to assert their individuality. Indeed, conformism is everywhere. One can look at brand loyalty studies for a superficial view.

    But are you really comparing millennials to WWII GIs, many of whom developed their identities under hardscrabble circumstances, built their own homes, farmed their own land and had a real sense of what it meant to have a national pride that came complete with substance, and void of sarcasm? These people were manufacturing tangible things, coming to know sacrifice as a function of life and forming a substantive national identity, not recycling battery technology into pretty expensive packages, commoditizing human behavioral data and spying on people via their email subscriptions in order to sell them homes or gadgets.

    Because if you are, I think you are well off because I’m not seeing survival instincts from these kids.

    Frankly, I think the predisposition toward technology is more a function of pure convenience and distraction than anything else, and the penchant for collectivism an effort toward maintaining the reciprocal, personal validation necessary without a very strong sense of personal identity and under various clouds of uncertainty.

    I don’t think Bob Hope is really a good parallel for Jimmy Fallon, Rosie the Riveter for Caitlyn Jenner (or “Pink”?), Billie Holiday for Beyoncé or I-don’t-know-who for someone like Kanye. All talented people but they are part of a larger culture of opulent shark jumping for which there’s no comparison. Perhaps this will turn the millennials off. I hope so, but that’s not what I see all around me in the consequence free fantasy land that Obama has tried to build up around them in order to buy votes going forward.

    Rather, I see the Chinese-child-labor subsidized electronics as an escape from an economy, culture and world that is projecting something on the surface that has no correlation with what’s happening underneath. Many of them know this, which is why they aren’t buying homes or stepping out on their own. They’d rather party it up on their parents’ equity dime, and bide their time while trying to make sense of this cluster#$%.

    In any event perhaps they do need to band together, because I don’t think they stand a chance unless they turn the sorry state of affairs we currently have into THEIR OWN “WAR” worth fighting. And if the answer to that is the monetarist, collectivism gobbledygook I hear coming from the people trying to save this latest economic lab experiment from imploding (to save their jobs and avoid embarrassment) then they’re going to need to look elsewhere for inspiration.

    Don’t get me wrong; I hate how they’ve been used by the lizard people in government and finance. The loans situation is enough on its own. They’re good kids and it must be hell trying to make sense of all this. But I’m not seeing any above board thinking except from a select few, and the ones I’m seeing that from are educating themselves on how not to get screwed any harder, mostly.

  4. Julian the Apostate
    October 13, 2015 at 7:39 pm

    I have to concur with Breadandcircuses. The tightening noose of collectivism is making inroads everywhere these days. I’m not blaming the kids because other-direction is nothing new, Riemann wrote extensively about it in “the Lonely Crowd” and Edward Hopper’s art provided the iconic art reflecting the alienation inherent in it. Look at the multiple rip offs of his famous painting ‘Nighthawks’. Any of the youngsters who haven’t surrendered their brains completely are starving for a voice of reason (some of them find their way here) to try to parse all the contradiction being thrown at them. When I read some of their blogs they are all trying to learn something from their peers, online, rather than talk (a primitive form of communication done face to face) to an older head right there in their family (assuming they HAVE a family.) Hopefully when they reach grandparent status they’ll at least be on a level playing field in communication with their grandkids. Collectivism run amuck always ends up in piles of human corpses.

  5. rich black
    October 13, 2015 at 8:39 pm

    My 25 year old daughter, who is paying $1350 rent for a room in a dumpy 3bdr apartment in San Francisco, told me that she and her cohorts believe that the only way someone in their generation will be able to own a home is if their parents are wealthier enough subsidize them.

    In our current, low paying service economy, 80% of millennials will be living from paycheck to paycheck. They may not have much credit card debt, but they are loaded up with student and auto loan debt. As our economy gets more and more automated, the majority of millennials will earn less and less money. That, coupled with exponential government debt, and a more than hundred trillion dollar explosion in contingent social entitlement liabilities costs, will render most millennials destitute when they reach retirement age.

    • Peterb
      October 14, 2015 at 10:04 am

      Yes, what I’m seeing is that these kids are realizing that they will not be able to be the conspicuous consumers that their parents were. And are acting accordingly.

  6. Fred
    October 13, 2015 at 9:14 pm

    Wolf won’t publish my comment about Obama being a communist voted in by millennials. He’s a liberal and an Obama supporter I guess. Sorry Wolf. Thought you were a man of sound views. Guess not.

    • October 13, 2015 at 9:26 pm

      You post moronic hateful comments about millennials and others. You need to post this kind of stuff somewhere else.

      • Fred
        October 13, 2015 at 9:28 pm

        Thanks Wolf. I appreciate your comment. However, if you think about it, Barry has ruined the country. I don’t think you can argue with that. Millennials are whiners. Sorry but its true.

        • Petunia
          October 14, 2015 at 8:18 am

          Millenials may be whiners, but mine is a registered republican, and more politically astute than I was at the same age or even now.

          It was the Bushes and the Clintons that ruined the country. I voted for both at least once so it was my fault too. The Clintons turned me into a republican, and the Bushes turned me into a third party dissenter. I vote third party as a dissent.

        • NYC Millennial
          October 14, 2015 at 12:12 pm

          Well, I am a millennial in NYC and do not think I’m “a whiner”. I have worked incredibly hard to get to where I am. I worked through college, got a job in accounting directly out of college where I stayed for 2 1/2 years, then got a second better paying job in accounting where I’ve been for almost 6 years now working long hours and performing well, bought a condo in 2010 when they were cheaper (with my own money saved), and got married a couple years ago. We are about to close on selling our apartment after 5 years of abnormal returns in my view (~10% per annum cash-on-cash IRR including all monthly maintenance and taxes, which means appreciation not only paid for all home living expenses, but also allowed a six figure untaxed profit) and are moving to renting a 2BR in the suburbs until prices plunge as boomers downsize (which I feel they will since they won’t want to keep paying the outrageous property taxes in the tri-state area on a house way too large for them), at which time we’ll buy again. We are expecting our first child around Thanksgiving, have no debt of any kind, and are approaching a million net worth after saving 60-75% of our income annually plus condo appreciation mentioned earlier. I am 30 years old, so firmly in the millennial camp and am not a whiner.

        • October 14, 2015 at 1:08 pm

          Thank you for responding! There are a lot of millennials like you! But there are also a lot that are seriously struggling, like most people.

        • October 14, 2015 at 3:09 pm

          NYC Mellinial:

          OK. But, you didn’t have to be so whiney about it.

          Just kidding…

        • NYC Millennial
          October 14, 2015 at 1:36 pm

          Wolf, I get your comment and I feel for those struggling, but also believe that people have made their own beds (baring debilitating illness or other tragedies). Growing up in the midwest, I saw more opportunity in NYC, so moved here for college and have lived here since. In college, while considering a major with an eye towards what I liked, I also looked at employment trends when deciding upon an accounting major (with finance as a secondary major).

          Once out of college and working, I shared a studio in the Bronx until I could afford to buy. When buying, I looked for the most likely “up and coming” neighborhood, not the hottest neighborhood at the time. When selling, I waited until people starting throwing offers at me in the now hot market before deciding to sell and going back to renting until the market turns again.

          The point being that EVERY MOMENT you live through right now presents you with a choice whether to continue on the path you’re going or look for better opportunity elsewhere. Generally, I feel that those struggling are continuing on the path they’re going while those excelling keep looking for better opportunities.

  7. October 13, 2015 at 10:57 pm

    I doubt there is a millennial alive that spends more on Amazon and Ebay than I do.

    Since the birthrate is dropping, the cycles should be drawn to reflect the decreasing population over time to give a better idea of the insignificance of these changes from collective to individual, etc. Do you think these waves mean anything in, say, Japan or Germany or even Russia as their populations dwindle to nothing?

    For without people, who is left to buy, invent, innovate anything?

  8. Silverado
    October 14, 2015 at 1:49 am

    I’m…amused how many think this dollar thing is just going to keep dragging along and going on for what?? Forever?? Talk about Millennials reaching retirement age and surely the dollar will be there right along side them. Right?? And of course at it’s present value too. Won’t it? Predicting future financial happenings is akin to predicting the weather so quit making fools of yourselves and acting like you think you know what’s going to happen financially into the future. Because you have no idea about that OR the weather in the future except that it will be ever changing just like the world of…finance is going to do – dollar or (I’m betting anyway on) no dollar. Have any of you even thought about what comes next after the dollar fails for one minute?? NO you haven’t!!! So wish us all luck because we’re going to need it. Especially with a police state banana republic of a country run by a bunch of criminal psychopathic neocons looking to blow up the world. Just look at what they’ve done…

  9. fred
    October 14, 2015 at 5:52 pm

    If you are a millennial you are a whiner. If you are in NYC you are and idiot. If Wolf posts this I will be surprised since he seems to be a one per center cruising on a yacht his dad bought for him.

    • October 14, 2015 at 8:04 pm

      I let your comment go through just to show everyone what kind of person you are! I previously explained why I trashed your comments this way: “you post moronic hateful comments about millennials and others.”

      Your current comment proves this.

      BTW, my dad (whom you somehow mentioned), along with my mom, died in a plane crash in Turkey in 1976 (in a Boeing, if you want to know). No freebees for me.

  10. Julian the Apostate
    October 14, 2015 at 6:43 pm

    NYC Millennial, I applaud you for your success. Surely you realize that your accomplishment would be in the upper 5% of ANY generation. You have the Math Gene, and are comfortable with numbers. Unfortunately your faith in the future is that of 150 years ago. Today Zero Hedge reported that Illinois is out of money to pay pensions. The only difference between IL and the US government is a digital printing press. NY State is not far behind. If most of your money, excuse me, currency is with the banksters you young man are in deep poo doo. Here endeth the lesson.

  11. ML
    October 15, 2015 at 1:57 am

    To me in the UK, the USA is suffering from the Facebook generation. Where in exchange for ‘meeting place’ millions of people can hang about for free, their time on-line subsidised by advertisers.

    A few exceptions do not disprove the generalisation that the rise of social media has created and contributed to the biggest waste if time and productivity in economic history.

    Ask a typical user where would they rather be? At work, or playing around on line?

  12. SymbolikGirl
    October 15, 2015 at 9:03 am

    Another Millennial here and I just wanted to recount my own experiences here in Toronto, Canada. As the daughter of a pair of very hardworking people I have never had a free ride, I’ve worked since I was eleven (paper route), sold car stereo’s at audio shows when I was fourteen and worked at Sears when I was in high school so that I could put money away for University. I paid my own way through school and worked full time as well as studied full time in my third and fourth years to pay the bills. When I graduated it was right after 9/11 and the dot com bust was biting hard and while I struggled to find a job I was able to land one in sales to put food on the table. I’ve never lived at home since I left after high-school and have, like everyone else had times of struggle, even now working in Engineering Sales I live paycheque to paycheque because living in the Toronto area is very expensive and it has been hard to get a leg up. I’m currently looking at finding employment outside of the city so that I can decrease my cost of living and eventually afford a house. I don’t have a cell phone, don’t have cable and don’t go on facebook. I spend my free time in nature, camping, hiking, rock climbing and canoeing. I volunteer with various organizations and get a lot of satisfaction from serving others. Many of my friends have the same experience, job struggles and wrestling with the areas high cost of living seem to be a main feature. Many of my friends have, like me, begun looking to the smaller cities out East and in the Prairies for a more sane cost of living. None of us expect anything from society or the world, we do our best with what we have and I have never understood the vitriol that is aimed at us. I’m in the office at 7 and work until at least 5 most days, the boomer management tends to come in around 9 and often leaves at 4 and are never around on Fridays, especially in the summer so I don’t know where the claim comes from that we are somehow lazy.

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