In California, millennials are falling behind on their debt payments

Inflation and persistently high interest rates are taking an increasing toll on California as the state experiences rising unemployment and slowing wage gains. And those who feel it the hardest: the largest and perhaps most budget-conscious generation of all.

Millennials, aged approximately 28 to 43, are generally thought to be more averse to taking on debt and to be more savers than previous cohorts such as Generation X (ages 44 to 59) and baby boomers. (60 to 78 years old).

But new data from UC Berkeley’s California Policy Lab shows that even as consumer debt rises overall and becomes increasingly difficult to manage for all but the youngest generations in America When older, millennials have the most difficulty repaying their loans on time.

In the first quarter, 7.6% of millennial borrowers were at least 30 days late on their monthly payments on their credit card, auto and other loans. That compares to 6% of Gen Previous generations, Silent and Greatest, had even lower delinquency rates.

Unlike Gen And economists fear that financial pressures will continue to mount, particularly with the end of the pause on student loan repayments. Among other things, millennials are known for carrying a lot of college debt.

“I don’t see any reason to believe that delinquencies aren’t going to increase,” said Evan B. White, executive director of the California Policy Lab.

Home foreclosures and personal bankruptcies at all ages are still very low by historical standards, as is the percentage of after-tax income that households spend on paying off debt, another important indicator of financial stress.

Even so, consumers in California and across the country have taken on more debt in recent quarters, including through credit card borrowing. And 30-day delinquencies have been gradually increasing – a harbinger of potential problems to come.

So far, consumer spending, which accounts for the bulk of the country’s economic growth, has held up well. But many people are feeling the effects of what has been a long period of high inflation and high interest rates. A decline in consumers could have a significant effect on the economy as a whole.

In the Federal Reserve’s annual report on the economic well-being of Americans, also released this week, about two-thirds of adults surveyed said changes in the prices they paid in 2023 compared to the year previous period had worsened their financial situation. And a fifth of them said inflation had made the situation worse.

The Fed report finds that 72% of adults are “doing well” financially, which is similar to the 2022 figure of 73%, but well below the recent 2021 high of 78%.

U.S. households continue to benefit from a strong labor market, including solid, albeit slightly smaller, wage gains. The nation’s unemployment rate was 3.9% in April, the 27th consecutive month in which the jobless rate has been below 4%, the longest such stretch since the 1960s.

However, the employment situation in California is not as good. The pace of job creation statewide is lagging behind that of the nation. And California’s unemployment rate, 5.3% last month, was the highest in the nation, reflecting weakness in key sectors such as entertainment, high technology and business and professional services. The number of unemployed people in the state increased by 164,000 over the past 12 months, according to the California Employment Development Department.

Meanwhile, wage growth has slowed more in California than in the country as a whole — and it’s now below the rate of inflation, meaning workers’ purchasing power is declining.

In the 12 months ending in April, the average hourly wage for all private sector employees in California increased 1.4% from the previous year. This is less than half the rate of wage growth and inflation in the United States. In contrast, from 2016 to 2022, California employees saw their salaries increase by an average of 3 to 6% per year.

Nationally, aside from student loans, delinquencies on all types of consumer debt have been steadily increasing since late 2021, according to the New York Fed.

During the first two years of the COVID-19 pandemic, consumers significantly reduced their debt, thanks in part to stimulus checks and other government programs. But since then, delinquencies on credit cards, in particular, have surpassed pre-pandemic levels, and a growing number of borrowers, mostly young adults, are maximizing their plastic spending.

Why millennials seem to be struggling more financially may seem confusing at first. They are the most educated generation and the first to grow up in the digital age. But many millennials also had the misfortune of entering their formative adulthood in the midst of the Great Recession that began in late 2007 and left a trail of professional and financial difficulties for a few years. Saddled with student loans and other debt, they have been slower to move out of their parents’ homes, start families and build wealth compared to previous generations.

More recently, with mortgage rates and housing prices skyrocketing, many millennials are stuck in apartments and feeling the pressure of higher rents and prices for some services they are likely to need. depending on their stage of life, such as daycare.

In fact, the Fed’s Economic Well-Being Report finds that while there has been little change for most population groups between 2022 and last year, one notable exception is parents living with their children. children under 18 years old. Since women are having children later, this group would include a disproportionate share of millennials.

“These are years where we’re moving toward higher spending on buying a home, buying a car and even putting money aside for kids’ college educations,” said Greg McBride, chief financial analyst at, which studied generational differences in debt management. “When we’ve had the type of inflation that we’ve had, it really puts a strain on tight budgets.”

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