How Are Older Gen Zers Faring in Today’s Job Market?

Our latest analysis focused on Gen Z, exploring their spending habits, finances and behaviors. In a couple of months, a cohort among adult Gen-Zers will graduate from high school or college and enter the workforce. What sort of job market are they entering into and what does this environment signal about their future spending?

Generally speaking, many economists have been identifying the job market as “strong” and consumer spending “resilient.” Over time, we have been adding caveats to those two adjectives. For consumer spending, the caveat has been around the income gap: Those who have higher household incomes or have savings buffers are the ones driving consumer spending, or able to better afford emergency expenditures. 

Looking at the often-cited figure of the unemployment rate at 4%, it is hard not to call this labor market “solid.” However, similar to spending, the labor market has been getting its own caveats throughout 2024.  For those looking for a job, the labor market has been described as “frozen.” This particularly applies to white collar jobs as hires have generally been concentrated in health care and state/local government amid a declining overall hiring rate.

To see the frozen side of the labor market at an aggregate level, one can look at the Job Openings and Labor Turnover Survey (JOLTS) data by the Bureau of Labor Statistics. Although January data will not be released until March 11, there is already a very clear pattern for most of 2023 and 2024: Job openings, hires and separations have been declining for a prolonged period of time.  

For those who are satisfied with their employment situation, these data points are not as concerning as they are not actively applying for jobs and the JOLTs data also shows that involuntary separations have been low - albeit they increased slightly in the second half of 2024. This makes us believe that, unless there are increasing involuntary separations in early 2025 – especially in the private sector – the relatively low unemployment rate will continue to support consumer spending in the near term. 

Heightened economic uncertainty so far meant that while there are no increased layoffs, there are also no plans to increase headcount either. Many sectors in the Census’ Business Trends and Outlook Surveys are showing a downturn in intentions to hire in the next six months. Although CFOs feel more optimistic about the economy in general, they are not as optimistic about their companies’ revenue growth as before the elections, which is perhaps adding to their hesitations to hire.

All that said, for those who are newly entering the labor force, this is a difficult time to get a job. The unemployment metrics both by Morning Consult and the BLS support this finding. Guy Berger at the Burning Glass Institute points out recent weakness for the younger cohort (18-24 year olds) in his analysis using the BLS data: Unemployment for the younger generation is rising even if they have some post-secondary education. He likens the current environment they are experiencing to the early phase of the Great Recession, before Lehman Brothers failed, with hirings falling instead of layoffs rising.

Similar dynamics have developed in Morning Consult’s unemployment index, where the index levels have been rising for the 18-24 age group as well as those with some college and a high school or less degree. 

Until last week, the unemployment index has been rising for many cohorts. Part of this increase is seasonal as Morning Consult does not adjust this dataset for seasonality. Similar patterns can be observed during January 2024 and January 2023. In the last two weeks, however, detailed demographic data showed that some cohorts' index levels are reversing. Perhaps, unemployment at an aggregate level is not as much of a concern as January data showed. This is especially true for prime age male workers and those with a post graduate degree.

The same cannot be said for the younger cohort. Their unemployment levels continue to rise. For those who are entering the workforce with some college degree, the prospects do not look positive either as the index is fast approaching its near-term high. 

As our recent Gen Z report showed, this generation still relies on their parents or partner’s parents for financial support. 1 in 4 older Gen Zers said they share households with their parents and they get support from parents to pay for household expenses. A highly competitive job market in a period of very few hires would mean that this reliance on their spending is likely to continue if not increase in the near term. While their parents and partners’ parents may be able to support them in the near future, the level of support hinges on the latter’s employment conditions as well as income and savings levels. If employment conditions turn negative more broadly and thereby affect Gen Zers support group, then we would see this cohort pull back spending – especially on discretionary categories, which younger generations tend to allocate more of their spending to.