By Janet Adamy
The economic hit of the coronavirus pandemic is emerging as particularly bad for millennials, born between 1981 and 1996, who as a group hadn’t recovered from the experience of entering the workforce during the previous financial crisis.
For this cohort, already indebted and a step behind on the career ladder, this second pummeling could keep them from accruing the wealth of older generations.
Jaclyn Jimenez put herself through college working for her father’s manufacturing company, but couldn’t find anything comparable when she graduated amid the economic slump of 2008. Even though she lowered her sights, she was turned down for roles from office assistant to drugstore worker. As credit-card debt piled up, she took a job selling wedding gowns at a bridal salon, then leveraged that experience to land a sales position at Nordstrom. She was finally gaining traction, she says, having worked her way up to manager.
Then the pandemic struck the nation in February, sending the economy into a tailspin. She lost her job, and Ms. Jimenez has now joined the 4.8 million millennials who the Federal Reserve Bank of St. Louis says lost work since the new coronavirus triggered a recession. The group had more losses than the two previous generations.
“It’s been difficult to struggle so much and think that you’re getting somewhere, and you’re moving forward, and you finally see a glimmer of hope, and then this all hit,” said the 34-year-old Orange, Calif., resident. “Am I ever going to have an opportunity to have what my parents had?”
The 12.5% unemployment rate among millennials is higher than that of Generation X (born between 1965 and 1980), and baby boomers (1946 to 1964), according to May figures from the Pew Research Center.
One reason is that some of the hardest hit industries, including leisure and hospitality, have a younger workforce.
Millennials have found it fundamentally more difficult to start a career and achieve the financial independence that allowed previous generations to get married, buy a home and have children. Even the most educated millennials are employed at lower rates than older college graduates, research shows, and millennials’ tendency to work at lower-paying firms has caused them to lag behind in earnings.
“It’s a sign that something has broken in the way the economy is working, ” said Jesse Rothstein, professor of public policy and economics at the University of California, Berkeley, and a former chief economist at the Labor Department during the Obama administration. “It’s gotten harder and harder for people to find their footholds.”
As a result, the millennial generation has less wealth than their predecessors had at the same age, and about one-quarter of millennial households have more debt than assets, according to the St. Louis Fed.
About one in six were unable to cover a $400 emergency expense before the pandemic started; that share is about one in eight among all Americans, the bank found.
Millennials are now at risk of falling further behind because they entered the pandemic in a weaker position than older Americans.
Caitlin Robles, 35, said she felt lucky to get a job maintaining a website for Sacred Heart University when she graduated from there in 2007 with a business management degree. But with $67,000 in student loans, she needed a second job to pay for them and cover $650 a month in rent to live with two friends in Milford, Conn. Ms. Robles eventually got a second job working the front desk at a Massage Envy wellness franchise 15 hours a week. She planned to work there just long enough to make a dent in her debt.
Instead, she’s still working there nine years later and doubled her hours to pay the rising interest rates on her student loans and knee-surgery bills. Even after being promoted at both jobs, to associate director of web content at the university and to assistant manager at the spa, the $70,000 to $80,000 she earned a year wasn’t enough to pay down all her debt. She skipped a family vacation to save money. Her 70-hour workweeks left little time for dating.
To improve her credit score and lower her interest rates, Ms. Robles last year borrowed $30,000 from her 403(b) retirement account to pay off her student loans. She planned to pay off that loan in five years and start saving so she could buy a home when she turned 40.
That plan got derailed in March when Massage Envy shut down because of the pandemic, leaving Ms. Robles without a second income for three months. Since her location reopened in June, she has worked only seven hours a week because the company cut its hours and services. To conserve cash, Ms. Robles deferred payments on her retirement loan. Now she doesn’t know when she’ll be able to buy a home.
“I don’t want to work this way for the rest of my life,” Ms. Robles said. “I thought I had that figured out. And I don’t think I do now.”
Economists are most concerned that millennials’ scars from starting their careers amid the last recession never went away. Millennials on average missed out on more than $25,000 in pay, or 13% of their total earnings, during the decade that ended in 2017 as a result of the rising unemployment rate that started in 2007, according to an analysis published last year by Census Bureau economist Kevin Rinz.
That was a greater share than Gen X, which had their earnings reduced 9% over that time, and baby boomers, which didn’t get 7%. That’s mainly because millennials were less likely to work for high-paying employers than older Americans.
Although younger workers’ employment rates recovered more quickly than those of older workers, millennials’ earnings didn’t bounce back, Mr. Rinz found.
Demographers say that financial instability is prompting some millennials, who are aged 24 to 39 this year, to cohabit instead of wed, and to delay or forgo childbearing. Millennials helped push down the marriage rate to its lowest level on record in 2018, and drove the general fertility rate to an all-time low the following year.
“Exposure to something like this twice in the early part of your career, ” Mr. Rinz said, “could certainly have important and negative long-term effects on people’s finances, on their work prospects and all sorts of other family outcomes as well.”
Millennials’ early headwinds mirror those of the G.I. Generation, born between 1901 to 1924, said Neil Howe. The economist and demographer coined the phrase “millennial generation” in 1991 with co-author William Strauss. The G.I. Generation, also known as the Greatest Generation, was first hit by recessions that followed the Spanish flu pandemic of 1918, and then the stock market crash of 1929 and the subsequent Great Depression. They recovered economic ground later in life thanks to a sharp rise in schooling and a booming post-World War II economy.
Michael Rafidi, a 35-year-old chef, spent more than a decade working at top eateries in Philadelphia, Washington and San Francisco while dreaming of opening his own restaurant. In 2016, he started raising more than $1 million to develop an upscale Levantine restaurant that drew on his Palestinian heritage with dishes like smoked lamb and sumac carrots. He named it Albi (“my heart” in Arabic) and opened its doors in Washington’s hip Navy Yard on Feb. 20.
“I didn’t think twice about the timing being wrong,” Mr. Rafidi said. “D.C. is going in the right direction with restaurants. The dining scene is incredible. Everything was aligning perfectly.”
For the first few days, Albi was so popular that it was hard to get a table. Three weeks later, the pandemic forced Mr. Rafidi to shut down and switch to a limited takeout menu. He secured a Paycheck Protection Program loan. He said it isn’t enough to replace the lost revenue from operating at just over a third of his original capacity.
“I’m worried,” said Mr. Rafidi, who is relying on outdoor seating, a few inside tables and a newly added cafe serving pastries and coffee. “I put everything on the line these last couple of years to do this.”
Millennials with a bachelor’s degree have about four times as much wealth as their peers who lack that diploma, according to Ana H. Kent, a policy analyst at the St. Louis Fed. Yet the most educated millennials lag behind older college graduates in the job market.
Berkeley’s Prof. Rothstein studied employment rates among recent college graduates and identified what he calls a dramatic structural break for the group that entered the workforce around 2005. He found that each successive year’s group of college graduates has had lower employment rates relative to older workers in the same labor market than those before them.
Prof. Rothstein concluded that adverse early conditions permanently reduce college graduates’ employment prospects. That adds to a body of research showing that starting your career in a bad economy often carries a long-term penalty.
What surprised him was that when employment rates rose significantly following the 2007-09 recession for those already in the workforce, new entrants didn’t share in this improvement, he found in a paper he released last month.
Even college graduates who started their careers in 2015, and enjoyed several subsequent years of a strong labor market, were less likely to work.
For example, 24-year-old college graduates had an employment rate of 79.8% in 2015. Had the age-24 employment rate improved at the same rate as for older workers from 2009 to 2015, their employment rate would have been 81.6%, Prof. Rothstein found.
“It’s a finding that I don’t have a great explanation for,” he said. “I would have thought that the people who finished college in 2017, 2018 would be doing pretty well. But you don’t see that.”
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August 09, 2020 13:22 ET (17:22 GMT)
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