Inflation is surging and recession fears are growing, but young Americans plan to live life to the fullest this summer, even if they have to eat into their savings or go into debt.
After more than two years of coronavirus-related restrictions, Gen Z and millennials are more likely than their older counterparts to travel this summer, to spend more on those trips than previous years, and to take on credit card debt, according to a survey from Verasight commissioned by Bloomberg News.
“There's that need to get out there and enjoy yourself after two years of being cooped up,” said Jennifer Lee, senior economist at BMO Capital Markets.
Take Michela Tarantolo, 22, who recently graduated with a marketing degree from Creighton University in Omaha, Nebraska. She said her college experience was split by Covid-19, with two years of fun followed by two years of pandemic-induced caution.
That’s why she and three of her best friends spontaneously bought tickets to go to see their favourite band, 5 Seconds of Summer, in Chicago in July. The women will share a car and three nights in a hotel room, bringing the total cost to about $350 each.
“I’m just excited to get experiences back,” she said. “The experience of going out and doing something kind of overrides the expense of it. I am more willing to spend money on experiences because now we know that some things can change in a matter of moments.”
About 69 per cent of millennials and 65 per cent of Gen Z in the US plan to travel for holidays this summer, outpacing Gen X and baby boomers, according to the Verasight survey, which polled 1,521 adults in early May.
They’re also more likely than their older counterparts to spend more on holidays this summer than in previous years.
This spending comes at a time of growing economic uncertainty. Consumer prices rose 8.3 per cent in April, among the highest readings since the early 1980s, and prices for airfares and hotels have risen.
To make matters worse, the odds of an economic recession in the next year are steadily rising.
However, the economy, and particularly the labour market, remain strong for now. The unemployment rate for Americans aged 25 to 54 is at the lowest level since 2019, and the rate for those aged 16 to 24 is the lowest since February 2020, just before the pandemic began.
A record 4.5 million Americans left their jobs in March, suggesting workers are confident they can jump to another easily.
Meanwhile, many Americans were able to boost their savings in the past two years, with younger respondents to the Verasight survey more likely to say their savings increased during the pandemic. That was particularly true for 51 per cent of millennials and 49 per cent of Gen Z.
Those who do not have the savings to pay for their summer of fun may be going into debt instead.
Younger generations are more likely to have bigger bills this year, the survey found, with 27 per cent of both Gen Z and millennials reporting higher credit card spending than in 2021, compared with 16 per cent of Gen X and 11 per cent of baby boomers.
A record 537 million credit card accounts were opened in the first quarter of 2022, a jump of 31 million over the past year, according to data from the Federal Reserve Bank of New York. And the country’s largest banks said credit card spending surged in the first quarter as customers began travelling and dining out again.
Emmanuel Nwana, 25, is spending two weeks in Europe this summer with two of his friends. The nuclear medicine technologist from Washington, the US capital, spent the past two years at home or at the hospital where he works.
He’s OK that his tour through Portugal, Spain, Croatia and Poland comes at a higher cost because of inflation. To afford it, he’s cut back on spending by not going out as much and is only buying things he needs.
“It’s not fun that everything is more expensive, but to some degree having been in the house locked for two years, you kind of have to live your life and bite that bullet,” Mr Nwana said. “I’m sacrificing things so that I can take this bigger trip — I look forward to just forgetting everything for a couple of weeks and turning off life.”
