Gen Z isn\u2019t ok\u2014that\u2019s the official diagnosis from Oxford Economics, following a deep dive into the generation\u2019s economic prospects. Indeed, the no-hire no-fire labor market, coupled with the asset headwinds of unaffordable housing and low wage growth, means the youngest entrants to the labor market could face \u201clong-term scarring.\u201d <\/p>\n
But the outlook for Gen Z isn\u2019t just affecting these young individuals; it\u2019s having wider ramifications for the economy as a whole. A new report from Oxford Economics not only reveals the level of activity lost because Gen Z cannot enter the labor market, but also the cost of them still living with their parents<\/a> and consuming less as a result.<\/p>\n The report, titled \u2018The kids aren\u2019t alright\u2019, describes how $12 billion a year is being lost because younger people are spending less on housing, transportation, and food by living in the family home.<\/p>\n One of the key factors determining the outlook for Gen Z is the job market<\/a>, where the hiring rate has been trending down since 2022, and now lies at 3.2%, well below its historical average and on par with the rate during the COVID pandemic.<\/p>\n \u201cFor young workers, the state of the labor market is the most important piece of the puzzle when determining overall economic health, as these individuals have not had the opportunity to accumulate wealth,\u201d writes associate economist Grace Zwemmer. \u201cYoung workers are more vulnerable to economic downturns, and a weak labor market can have a lasting negative impact on wage growth and earning potential.\u201d <\/p>\n Gen Z job seekers\u2014currently aged 13 to 28\u2014are facing multiple barriers to landing a role. With hiring tracking downward, unemployment has risen particularly fast among those with less experience, with the unemployment rate for 16- to 24-year-olds well above the national average. While America\u2019s overall unemployment rate has sat around 4% as a three-month moving average, those in the 16-19 age bracket are contending with a 14% rate, while 19-24-year-olds average around 9%, according to Oxford\u2019s analytics.<\/p>\n When breaking down the reasons for Gen Z job seekers to be unemployed in 2025, the following categories have emerged: market reentrants from college graduates, young people losing temporary roles, and those being laid off. \u201cWhen labor market conditions deteriorate, young workers are often the first to be let go,\u201d Zwemmer adds.<\/p>\n On top of that, the tight market means even those who do manage to get a job can\u2019t \u201chop\u201d from one contract to another to build their earnings and experience. \u201cYoung workers typically benefit from higher-than-usual wage growth early on in their career, as faster skill accumulation helps them get promoted from entry-level jobs and more job mobility allows them to switch employers to find larger pay bumps over a shorter period,\u201d the economist continued. \u201cBut this isn\u2019t happening this cycle. Instead, upward mobility has stalled, and wage growth has fallen most sharply for workers aged 16-24.\u201d<\/p>\n Shaky foundations<\/p>\n A no- or low-stakes approach to the job market also means Gen Z isn\u2019t acting in the economy the same way previous generations did at the same age. For example, without a job, younger people often lack the financial means to move out of their parents\u2019 home and start paying for their own rent, utilities, and groceries. <\/p>\n \u201cWe estimate that there are an additional one million young adults aged 22-28 that are living at home with their parents, compared to pre-pandemic trends,\u201d added Zwemmer, adding that research from the New York Federal Reserve<\/a> suggests the associated drag on spending is worth $12 billion.<\/p>\n For those people hoping to achieve greater independence one day, there\u2019s good news: Millennials faced a similar predicament a few decades ago. The study found that during the Great Recession, the share of young adults aged between 22 and 28 rose from 27% to 32% and remained elevated for years after\u2014\u201da sign of the permanent scarring effects of weak early career earnings, as well as tighter borrowing conditions,\u201d the report adds. <\/p>\n