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."
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.
Write to Janet Adamy at janet.adamy@wsj.com
(END) Dow Jones Newswires
August 09, 2020 13:22 ET (17:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.