Millennials are having fewer babies - and that could spell trouble for the economy as fewer young people buy houses and cars
- By delaying marriage and having children, Millennials are setting the economy up for a potential slowdown – particularly in the housing and auto markets
- Experts project Gross Domestic Product will slow down to a pace of 2% growth later on this year, down from the current 3.2% year-on-year trend
- Median net worth among people age 25-35 years old was $18,200 in 2016, compared to $31,273 in 1995 - a fact exacerbated by crushing student loans
- Overall, experts say investors are not prepared for the resulting economic shift
- They suggest investing outside of the housing and auto markets – and focusing on areas such as artificial intelligence that promise consistent, if slow, growth
David Kelly, chief global strategist with JPMorgan Funds
The fact that Millennials are having fewer children than older generations is posing a serious challenge to the U.S. economy, according to a recent report.
By delaying marriage and having children, Millennials are setting the economy up for a potential slowdown – particularly in the housing and auto markets, said David Kelly, chief global strategist with JPMorgan Funds, and author of the report.
'Forming a new household or growing a household is a driver of the economy,' he told DailyMail.com. 'It forces people into making (financial) decisions they may not otherwise make. And the fact that they're not making those decisions is sapping energy out of the economy.'
Kelly projects Gross Domestic Product will slow down to a pace of 2 percent growth later on this year, down from the current 3.2 percent year-on-year trend.
The GDP is a measure of the value of all goods and services produced in a nation – and is a metric used by economists to gauge how robust the economy is at any given time.
The proportion of young Americans who own homes has declined since the 1980s and 1990s, particularly following the Great Recession of 2008. Source: Board of Governors of the Federal Reserve System
'There's a slowdown emerging already,' Kelly said, noting that the number of babies born in America in 2018 – fewer than 3.8 million – was the lowest in 32 years.
'We have a people problem,' Kelly said. 'Unless we get more workers and more babies we're not going to have the supply and demand necessary to generate GDP growth.'
The report notes that many Millennials carry significant student loan debt, making it harder for them to afford a home – or get a good mortgage rate when they do decide to buy.
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Median net worth among people age 25-35 years old was $18,200 in 2016, compared to $31,273 in 1995, according to data from the Board of Governors of the Federal Reserve System.
The decline in wealth accumulation for that age group followed the Great Recession of 2008, when many Millennials were graduating from college, seeking jobs, or expected to be in prime earning years with steady employment.
The setbacks of that era are still haunting the generation, which has only seen a slow recovery in their earning potential and savings since that time.
Adding to the burden is a growing national debt that will eventually have to be addressed by the Millennial generation – likely through cuts to Social Security and Medicare, or increased taxes.
Millennials are also the most diverse generation in American history, with about 44 percent identifying as a racial or ethnic minority – compared to 25 percent of individuals age 21-36 in 1985.
That could be a factor in their retirement, as minorities consistently tend to accumulate less wealth than their white counterparts – even when comparing groups of similar ages, incomes, education and marital status.
Overall, investors are not prepared for the resulting economic shift, Kelly said.
'I think the problem is that investors are positioned to invest in companies that can only thrive in a fast-growing environment,' he said. 'We need to adapt to a world of slow growth and the companies that can adapt to slow growth should do better.'
'You need companies and ideas that are going to build new markets or quickly gain market share,' he added. 'If the tide isn't rising you need a special kind of boat.'
That means looking to invest outside of the traditional cyclical sectors of housing and auto markets – and taking an eye to areas such as artificial intelligence that promise consistent, if slow, growth.
The biggest risk, Kelly said, is ignoring the rapidly approaching economic shift.
He warns that U.S. politicians are being short-sighted as they focus on so-called America-first issues.
'I think our political system is not really well positioned to deal with this,' he said. 'I think we're having old arguments about America's position in the world and whether other countries are stealing our jobs or our wealth. I think that's not the point. If labor is scarce we need to make sure that labor is educated.'
'The United States needs a more international posture at the very time it seems to be retreating to a nationalistic one,' he added.
This graph illustrates the downturn in median net worth among young Americans starting in 2010. The decline in wealth accumulation for that age group followed the Great Recession of 2008. Source: Board of Governors of the Federal Reserve System
