As unemployment trends downward, attention has turned to wage stagnation this summer as analyst wonder what will happen if we get back to full employment but people don’t feel like they have money to spend. According to a new Gallup poll 45% of Americans are spending more now than they were a year ago, and millennials are more likely than other groups to have increased their spending. That’s good news for business, but maybe not so great for the millennials themselves.
Millennials discretionary spending is up, which could be a problem
“Millennials increased spending on discretionary items bucks the overall trend of increased spending on essential items at the expense of discretionary spending. This may be because younger people can generally spend more on discretionary items, if they have lower housing costs and are not providing for children,” writes John Fleming at Gallup.
Millennials have lower housing costs for a couple of different reasons, none of them great. A lot of millennials who graduated into the worst part of the recession are living at home, and many who managed to find a decent job still can’t get a mortgage, one of the factors behind the soft housing market. For that spending to be diverted into discretionary spending means that more millennials may feel like saving for a house is no longer a priority.
This shows up in shopping habits as well, where millennials were the most likely to go shopping for fun, make impulse purchases, or spend at least a week’s pay on a single purchase (they are also a lot more likely to save by shopping online). We don’t have data on how the yes’s correlate, but millennials are also the most likely to self-report that they have ‘followed a strict budget.”
Baby boomers still have most of the discretionary income
As for the economy in general, Fleming points out that baby boomers still control most of the discretionary spending and they have been focused on utilities, home maintenance, healthcare and other necessities. Since their priorities determine the national average, more or less, merchants will have to wait til the baby boomers get back to more discretionary spending or for a bigger boost to wages so that Gen X and millennials spending patterns have more of an impact.
