COVID-19 and Financial Setbacks for Millennials

June 16, 2020

This 11-minute podcast was released June 16, 2020.

Ana Kent, policy analyst at the St. Louis Fed’s Center for Household Financial Stability

“Millennials were old enough to have been negatively affected by the Great Recession, but we’re also young enough to be early to mid-career still when COVID-19 pandemic hit,” says Ana Kent, policy analyst at the St. Louis Fed’s Center for Household Financial Stability. She talks with Maria Hasenstab, media relations coordinator, about how COVID-19 could cause devastating financial setbacks for millennials, a generation still reeling from the Great Recession.


Maria Hasenstab: Welcome to Timely Topics, a podcast series from the St. Louis Fed. I’m your host, Maria Hasenstab and today I’m speaking with Ana Kent, a policy analyst at the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. Ana, thanks for being here today.

Ana Kent: Thanks for having me, Maria.

Hasenstab: Ana, in your latest on the economy blog post, which is titled “Three Reasons Why Millennials May Face Devastating Setback from COVID-19,” you look at how the Coronavirus is affecting millennials. I like how you kicked it off mentioning that millennials are often associated with things like avocado toast and craft beer. But this generation, which you and I are both members of, has also become known for its financial struggles in the wake of the Great Recession. Talk to me about some of the challenges millennials have faced as a result of the Great Recession.

Kent: Thank you, Maria, for bringing up our most recent blog post. As you said, we are known for many good things in our generation, but we’re also becoming increasingly more known for having difficulties with our money. Struggling. And recessions, as we know, tend to spell bad news for everybody, but young people in particular because they tend to have a more precarious foothold in the economy. They’re just starting out with jobs, or they’re, perhaps, finishing up their education.

The Great Recession was no exception to this. For many young homeowners who were really Gen Xers at the time, the housing bubble completely depleted much of their wealth. If they were able to hold onto their homes, however, the subsequent house price appreciation meant that they gained, re-gained a lot of that wealth. But for millennials, the story is pretty different. The majority of us were not homeowners in 2007 when the Great Recession hit. In fact, the oldest of us were only 26. So, it’s perhaps no surprise that not very many of us were homeowners. So, the story for us here is that we were entering a very tough job market, labor market in 2008, 2009, 2010 when the recovery was getting started. Or, we were going back to school and thus taking on that subsequent debt.

And so, millennials have really carried the effects of the Great Recession on for much of the decade. And it still seems to be affecting their wealth today to the point where they’re still below where we would expect them to be based off of older generations.

Hasenstab: Thank you for that, Ana. And that was before the COVID-19 pandemic. So, you looked at three reasons why many millennials may be especially hit hard now due to the Coronavirus and its effect on the economy. So, let’s talk through those reasons. The first reason you listed is millennials are still reeling from the Great Recession. Isn’t everyone still reeling from the Great Recession? Or how is it specifically affecting millennials?

Kent: So, thank you for that question, Maria. If there’s one thing that we’ve seen repeatedly, it’s that the COVID-19 pandemic has really exposed and highlighted underlying inequities that were already there both in terms of health and economically before the pandemic occurred. So, these weren’t created by the coronavirus situation, but many were certainly exacerbated by it. In terms of generational comparisons, younger families, millennials specifically, have been slower to recover from the Great Recession and are still below where we would expect them to be, as I said. This is indicative of a larger underlying trend of increasing wealth inequality between older and younger groups. And no, it’s not that younger groups haven’t had time yet to accumulate wealth.

So, in our research, we’re able to look at, similarly, each family. So, for example, we’re comparing families in their thirties to families 30 years ago also in their thirties. So, we’re comparing like with like. And what we find is that age 60 really appears to be this turning point where as of the most recent data, if you were 60 or older, you tended to have a typical family at the median, more wealth than a similarly aged older family 30 years before. But for younger families under age 60, millennials, many Gen Xers, some of the younger boomers, this means that they had less wealth than younger families did in the past.

So, another way to say this and another way to look at it is that generational wealth inequality is increasing over time. Back in 1989 the gap between a typical older family and a typical younger family was eight to one. So, older families had about eight times as much wealth, median. Today, that number is 12 times as much wealth. So, you can see that back up has really grown.

Hasenstab: Wow. It really has grown. The second reason that you list in your blog post is that millennials are being hit harder by this COVID-19 effect on the economy because millennials have little to no financial buffer. Is that more severe than other generations?

Kent: So, if we’re looking at the financial buffer at different generations, millennials do have less than we find for Gen Xers and for boomers. We’ve already talked about the widening generational wealth gap. And millennials had less wealth on average than Gen Xers and boomers of similar ages, even as of the fourth quarter of 2019, which was the end of a record long economic expansion. So, if they were still behind at the end of a boom, it’s no surprise that they would be fragile during the bust.

And when I looked at cash on hand, I saw that younger generations, millennials, and especially the even younger Gen Z’s are more vulnerable. For example, if we look at this famous $400 emergency expense question from the Board of Governors, we see that these younger families are less able to handle those type of emergency expense with cash or its equivalent. Recent research by my colleagues Lowell Ricketts and Ray Boshara has also found that liquidity, which is basically easy access to cash, is a key predictor of serious delinquency or failing to pay outstanding debts. So, vulnerable groups that have less of a financial buffer are more likely to have difficulties handling economic blows like the current one we’re experiencing.

Hasenstab: Well, thanks for explaining that, Ana. The third reason you list in your blog post is that millennials face sizeable job loss. Recent reports show this is an across the board concern. But talk to me about the specific job loss effects on millennials.

Kent: So, in terms of the specific job loss effects on millennials, here’s where everything we’ve been talking about comes together in this perfect unique and toxic storm for millennials. Millennials were old enough to have been negatively affected by the Great Recession. But we’re also young enough to be early to mid-career still when COVID-19 pandemic hit. Meaning that we’ve been doubly hit in just over 12 years or so by major economic hits here. And what this means is that we were economically vulnerable going into the pandemic with less fault than older generations of similar ages and little to no buffer for many.

And then many millennials, particularly the more vulnerable millennial groups like women, blacks, and Hispanics, and less educated millennials lost their jobs or lost hours because of the shutdown. And faced with no income or this reduced income and difficulty trying to find work, little to no financial buffer, very little wealth, these millennials in particularly are the ones that have been struggling and disproportionally economically affected by the Coronavirus.

And if I may add, specifically, I found that Hispanic millennials were hit particularly hard in March by job loss. And those that had less than a bachelor’s degree were hit hardest in April. Women were hard hit by job loss in both months. And even though the most recent data which wasn’t in the blog, but in May we’ve seen a lot of those jobs starting to come back. We know that many of the people that lost those jobs in those more vulnerable groups, their jobs may be slower to come back. So, they might still be facing great difficulty financially.

Hasenstab: Ana, that was a really powerful phrased that you used, “a toxic storm” when you look at all of the three different ways that millennials are being hit especially hard by the economic effects related to this pandemic. What are you hoping that listeners of this podcast and readers of your blog post take away from your research?

Kent: If there’s one thing that I’d hope that listeners and readers can take away from this research is that there’s been a lot of discussion recently as to the true extent of millennials’ economic difficulty and vulnerability, and more over where that responsibility lies. So, I’ve been quoted as saying that the idea of economically sinking or swimming by our own effort, while it’s very American, often ignores the fact that the tide is stronger now and many millennials are swimming upstream.

Some people, however, don’t really buy into that rhetoric. But the thing about a tide is that it’s invisible. So, it’s easy to say that there’s no tide, that everyone starts out with the same opportunities, but the data doesn’t support that. We know that’s simply not the case. Income levels haven’t kept pace with rising home prices, the cost of college has increased incredibly without commeasure of public investment. People are expected to provide individually for their retirements and health insurance whereas private companies and government took more of an active role in that in the past. And the social safety net, we know, wasn’t prepared for the COVID-19 crisis.

So, all in all, what I’d like listeners and readers to take away is that certain groups tend to be more economically vulnerable, less able to fully participate in the economy, like millennials, women, those who are less educated, Hispanics, and especially blacks. And when thinking about economic recovery, we should pay special attention to these groups to ensure they’re not left behind. And, instead, help them to be able to establish economic dignity and resilience. It’s a good time to be thinking about this for sure.

Hasenstab: Ana, I agree. Definitely a good time to be thinking about that. Thank you so much for your time today.

To read Ana’s full blog post, visit And for more Timely Topics podcasts episodes, visit You can also subscribe to our Timely Topics podcast series on Apple Podcasts, Stitcher, and Spotify. Thanks again, Ana.

Kent: Thank you, Maria.

Economists and experts talk about their research, topics in the news and issues related to the Fed. Views expressed are not necessarily those of the St. Louis Fed or the Federal Reserve System.

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