Is Gen Z about to repeat millennials' financial woes?
A new Bank of America Research report thinks so. "Like the financial crisis in 2008 to 2009 for millennials, Covid will challenge and impede Gen Z's career and earning potential," it reads, adding that a significant portion of Gen Z is entering adulthood in the midst of a recession, just as a cohort of millennials did. "Like a decade ago, the economic cost of this recession is likely to hit the youngest and least experienced generation the most."
Gen Z graduates entered a job market crippled by a 14.7% unemployment rate in May — greater than the 10% unemployment rate the Great Recession saw at its 2009 peak — and the fallout in the workforce has been severe. In April, 27% of Gen Zers were unemployed, according to St. Louis Fed data, dropping to 18.5% in July, but still remaining the most unemployed generation.
Heidi Shierholz, a senior economist and the director of policy at the Economic Policy Institute, previously told Business Insider that recessions typically hit younger workers harder in the short term, potentially reaping long-term consequences.
"The way a recession can really hurt people just starting out can have lasting effects," she said. "There's a lot of evidence that the first postgrad job you get sets the stage in some important way for later."
It may take a while for Gen Z to build wealth
Recession graduates typically see stagnated wages that can last up to 15 years, Stanford research shows. That was the case for the oldest millennials graduating into the Great Recession, which put their wealth levels 34% lower than where they would be otherwise.
"This kind of impact on a generation entering the workforce means that its prosperity and improved quality of life vs older generations is no longer guaranteed," the report reads.
However, the report continued, Gen Z's proficiency with tech and tech-focused education might prove to be an asset when entering the workforce.
And being forced to play financial catch-up can have benefits in the long run, Hannes Schwandt, assistant professor at Northwestern University's School of Education and Social Policy and author of the Stanford research, previously told Business Insider.
"Over time, what you see in these cohorts is a higher degree of mobility from one employer to the next," he said. "It helps them climb up the quality ladder."
Such job-hopping, he said, will help motivate Gen Z to look for more opportunities and teach its members more about what they do and don't want in a job.
