When people look to identify the most prominent obstacles to economic growth, the levels of consumer and federal debt are often high on any list. The current economic circumstances of the U.S. provides a case in point, as it is generally perceived that credit card debt and mortgage liability are key factors behind diminished consumer spending within society.
This is not entirely accurate because the total level of domestic debt as a share of the economy has been gradually declining. A more pertinent issue would appear to be the reluctance of national banks and financial institutions to lend money in instances where applicants have a less than perfect credit history. This cautious stance is impacting consumers and their capacity to spend and reinvest money into the economy.
Unemployment is also a contributing factor to diminished spending in the U.S., especially among Americans aged 18 to 29. The rate of joblessness within this social group is up to 12.7%, which is well above the national rate of 8.3%. This has forced many to reduce their weekly budgets and the amount that they spend on entertainment, food and transport. According to a study published by Generation Opportunity, 84% of this demographic will delay big-ticket purchases until the economy shows significant improvement.
SEE: The Generational Debt Gap
The Changing Face of Consumerism in the U.S.
While young adults are undoubtedly spending less in the current economic climate, it is fair to say that they also have different spending priorities compared to previous generations. The pronounced decline of the U.S. automotive industry provides some insight into this. Young Americans are far less likely to purchase a vehicle than they have been in the past, and the number of young people with driving licenses has decreased significantly over the last three decades. According to CNW Marketing Research, citizens aged 21 to 34 purchased just 27% of new cars in 2010, which is considerably lower than the corresponding figure of 38% in 1985.
Technological purchases have emerged as far greater priorities among modern consumers, and this shift can be attributed to both cultural and economic factors. While it is obvious that there is a significant financial difference between purchasing a $12,000 Kia and a $2,000 Macbook Pro laptop, the multi-purpose nature of devices such as personal computers and smartphones also ensures that they offer far greater value for the consumer's money. In fact, these products are now central to the everyday function of young adults. Cars have become an optional and often unaffordable luxury.
SEE: Steps To Take If You Lose Your Smartphone
The End of Ownership
The changing cultural and economic landscape also offers considerable insight into the declining housing market. The level of ownership among Millennials continues to fall. Between 1980 and 2000, the share of Americans under 30 who owned property fell from 43 to 38%. This trend was also evident among individuals in their early 30s, whose own share of ownership declined from 61 to 55% during the same period.
In addition to soaring levels of student debt and an unstable job market, it is fair to say that the decline in Millennial home ownership has also coincided with falling marriage rates. The rate of adults aged 25 to 44 who married fell by a staggering 15% between 1980 and 2000.
The Bottom Line
As much as the current economic climate is impacting consumer spending in the U.S., it is clear that cultural changes and a significant shift in the priorities of young adults are equally influential. Millennials in America have a different set of values and beliefs than their elders. Home and auto ownership are no longer as important as they once were. A negative perception of the economy is also discouraging young-people from making long-term future plans.