A Blog by Jonathan Low


Aug 13, 2020

Millennials Hit Hard By 2nd Financial Crisis Of Their Young Lives

"If it weren't for bad luck, I'd have no luck at all" Born Under A Bad Sign, by Albert King

Janet Adamy reports in the Wall Street Journal:

The economic hit of the coronavirus pandemic is 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. Already indebted and behind on the career ladder, millennials have found it 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
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.
Harder HitMore millennials than older generations havelost jobs because of the coronavirus-triggeredrecession.People who became unemployed betweenFebruary and May 2020*Source: Federal Reserve Bank of St. Louis*Not seasonally adjusted
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 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.
Old ScarsMillennials came into the pandemic in weakerfinancial shape than older generationsbecause they haven't recovered from the lastfinancial crisis. They have less savings...Percentage of households that wouldn't beable to pay for a $400 emergencySource: Federal Reserve Bank of St. LouisNote: Data as of 2019
...They had bigger losses on overall earningsduring and after the last recession...Average cumulative loss of earnings from2007 through 2017Source: Kevin Rinz, Census Bureau
...And even after the overall jobs picturerecovered, millennial jobs continued to lagbehind older workers.Employment rate among college graduatesSource: Jesse Rothstein, UC BerkeleyNote: Seasonally adjusted
%RECESSIONAge 22-30Age 31-401980'85'90'952000'05'10'157075808590
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.”
Seeking to mitigate that penalty is Ankur Jain, an entrepreneur who founded the venture fund Kairos, which builds businesses that help make life more affordable for young adults. Last month, Kairos started to place thousands of young adults in home health-care jobs through CareAcademy and Care.com and pay for them to earn the necessary certification.
Although home health jobs typically pay low wages, Mr. Jain said the program will include a path toward becoming a licensed practical nurse, which pays more and can act as a springboard for a career in health care. “What we need to do is find ways to get people back on their feet,” said Mr. Jain, chief executive of Kairos.
Millennials have some advantages as they face a second severe recession. A larger percentage have college degrees than previous generations, which could pay dividends over time. They will also help fill gaps in the workforce as the large baby boomer cohort retires. The young workers behind them, members of Generation Z, who this year are 23 and younger, have even higher rates of unemployment and less experience to buffer them from the economic fallout of the pandemic.
Ms. Jimenez, the former Nordstrom employee, paid her way through college at California State University, Fullerton, with the roughly $45,000 a year she earned helping run her father’s printed circuit boards design and fabrication business. She expected she would at least match that salary soon after graduating with a business degree in 2008.
But as she sent out resumes during the crisis, no one wanted to hire her. Even office manager or executive-assistant jobs required five years of experience that she didn’t have. As her father’s business took a turn for the worse, she started applying for hourly positions at CVS and Disneyland. They didn’t bite either.
Desperate for a paycheck, Ms. Jimenez took a few shifts a week at a bridal shop in Orange, where her mother worked. She was barely getting by when the bank foreclosed on her parents’ home, where she lived with her younger sister. Ms. Jimenez moved into an apartment with both of her sisters and a niece and leaned on her credit cards.
“That really locked me into being permanently behind,” she said.

By 2013, she was still struggling to get traction. She parlayed her bridal-salon experience into a job selling wedding dresses at Nordstrom in Brea, Calif., for $12 an hour plus commission. She made about $22,000 a year. Although she was grateful for the steady paycheck, her inability to find a professional job felt defeating, she said. “This is not where I thought I would end up.”
Still, she stuck with the upscale retail chain because it offered a path for advancement. Over the next six years, she moved up little by little, first to an interim wedding suite manager, then to an assistant manager in a few other departments. Last year, she clinched a job as service experience manager at the chain’s Riverside location, which paid $56,000 a year plus a $4,300 bonus.
Ms. Jimenez grew more optimistic about her career. She started thinking about one day becoming a Nordstrom regional manager, or even a director. With her bonus, she set her sights on whittling down the $12,000 of credit card debt she had accumulated during years of scraping by.
“I was finally on the track of basically almost becoming an adult because honestly I have never felt that way,” said Ms. Jimenez. “Then Covid hit.”
Nordstrom told workers in May that it would permanently close the Riverside store as part of a broader retrenchment. That put Ms. Jimenez out of a job in early July. Now she feels like “it’s 2008 all over again.”
Ms. Jimenez got $7,000 of severance that will help her pay the $700 a month she spends to live with her younger sister, a friend and the friend’s 7-year-old daughter. She is considering going back to school to earn an advanced degree in psychology so she can eventually become a therapist.
Recently a friend offered to help her get a job as a front office administrator at a dermatology practice in Newport Beach. It would pay about $15 to $17 an hour. She hasn’t decided whether to pursue it.
“I do feel like I’m starting back at square one,” she said.


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