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Figure 12Figure 13<\/p>\n
Such a surge of retirees has economic consequences that explain why consumer spending should remain resilient. Here are some of them:<\/p>\n
(1) Disposable income may grow more slowly than in the past or remain flat. That\u2019s because retiring Baby Boomers will no longer earn any wages and salaries. They undoubtedly earned much more than new entrants into the labor force.<\/p>\n
(2) The personal saving rate is likely to fall as the Baby Boomers continue to retire (Fig. 14<\/a> below). We are assuming that their consumer spending will remain robust even as they no longer get a paycheck. If so, then the national personal saving rate could turn negative in coming years.<\/p>\n (3) The main reason we expect that Baby Boomers will be spending lots of money in their retirement years is that they\u2019ve accumulated a record $85.4 trillion in net worth (Fig. 15<\/a> below). That\u2019s about half of total household net worth. Not surprisingly, there is an inverse correlation between the ratio of net worth to disposable personal income and the personal saving rate (Fig. 16<\/a> below).<\/p>\n (4) Many of the low-income consumers who are struggling financially are in the Gen Z cohort, who are the children of the Baby Boomers and the Gen X cohort (born from 1965 to 1980). The Gen Z cohort includes 57 million people who will be 16-29 years old this year. They are having trouble finding jobs because the unemployment rate for 20- to 24-year-olds is 8.3%, up from 5.5% in April 2023 (Fig. 17<\/a> below). Many have graduated from colleges with majors that don\u2019t match the requirements of the jobs that are available. In recent years, many companies have frozen their headcounts while they determine whether AI technologies can be used to boost the productivity of their current workforce. The Gen Z cohort also has lots of student and credit card debt.<\/p>\n Of course, as they grow older, Gen Zers\u2019 incomes and net worth will increase. For now, many of them are receiving some financial assistance from their Baby Boom (and Gen X) parents.<\/p>\nFigure 14<\/p>\nFigure 15Figure 16<\/p>\nFigure 17<\/p>\n