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.

SEE: The Spending Habits Of Americans

Related Articles
  1. Economics

    What is a Complement?

    A good or service that’s used in conjunction with another good or service is a complement.
  2. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  3. Stock Analysis

    From Shampoo to Soup, Unilever Has it Covered (UL)

    Open your fridge, your pantry, your bathroom cabinet and you'll find the Unilever logo. Here's how the company got so enormous.
  4. Stock Analysis

    JNJ vs. PG: Which is the Better Bet Right Now?

    These two stocks are long-term powerhouses, but one has the edge over the other right now.
  5. Stock Analysis

    The Top 5 Small Cap Restaurant Stocks for 2016 (BLMN,DENN)

    Learn about the market conditions that could help continue pushing restaurant stocks higher in 2016 and the five small-cap restaurants that are worth a look.
  6. Economics

    Why Commodities Aren't to Blame for Market Malaise

    Commodities are taking the brunt of the blame for poor investment performance. Are they the real villain?
  7. Economics

    Has IKEA Reached 'Peak Curtains?'

    An IKEA executive made a comment that would have rankled investors (were IKEA not privately held). Here's what he (probably) really meant.
  8. Stock Analysis

    Has Chipotle Hit Bottom? (CMG)

    Chipotle has suffered from a public relations nightmare. Can its stock recover?
  9. Stock Analysis

    Should You Steer Clear of GoPro (GPRO)?

    Is the GoPro growth story over or is there still gas in the tank?
  10. Stock Analysis

    How Will Walmart Weather the Next Bear Market?

    WMT has historically been a safe place to hide in bear markets. Is this still the case?
  1. Marginal propensity to Consume (MPC) Vs. Save (MPS)

    Historically, because people in the United States have shown a higher propensity to consume, this is likely the more important ... Read Full Answer >>
  2. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  3. Are Social Security payments included in the US GDP calculation?

    Social Security payments are not included in the U.S. definition of the gross domestic product (GDP). Transfer Payments For ... Read Full Answer >>
  4. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  5. How do changes in interest rates affect the spending habits in the economy?

    Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including ... Read Full Answer >>
  6. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
Trading Center