There has been a sudden surge in financial news articles over the past couple of weeks that blame Millennials for the current pace of inflation. See the articles at CNBC, Newsweek, Fortune, Fortune again. I find this trend very peculiar that multiple media outlets have decided to broadcast this odd economic belief at the same time. The source for all the articles is the same and I wonder if he was the one shopping his opinion around to any financial publication that would agree to print his words.
Millennials have been blamed for many things over the years. As a Millennial myself, it’s exhausting to keep up with all the things we have single handedly ruined. The latest accusations about Millennials causing inflation are especially confounding. Let’s break down what the articles are claiming about Millennials and inflation:
Bill Smead, Chief Investment Officer at Smead Capital Management, is the person behind all of these articles. He claims that Millennials have “too much money chasing too few goods.” The fundamental premise is true that if there is more demand than available supply of goods and services, prices will naturally rise. Smead points out that a similar phenomenon happened when the Baby Boomers came of age and replaced the Silent Generation in the 1970’s that the United States also saw a surge in inflation. Somehow Smead convinced writers at CNBC and Fortune to write multiple articles based on his weak analysis. Those articles then got picked up by news agencies around the country.
While it seems like this analysis could explain the surge in home prices, rents, and overall inflation, it simply doesn’t hold water. It’s not as if 92 million Millennials suddenly dropped out of the sky in 2022 with six-figure paychecks and began buying everything they can get their hands on. The last Millennials were born in 1995 and the first were born in 1980, which would make them aged 27-42 today. So it should be quite obvious to any observer that there have been an enormous number of Millennials in the economy for a while now. Prior to 2022 they were not accused of causing any inflation, despite all 92 million of them being adults and needing to rent or buy homes and apartments, purchase cars, buy food and clothing, etc.
Why Millennials Are Not Causing Inflation
But there is one single counter-argument that completely destroys all of these Millennial-blaming articles… inflation is not isolated to the United States! While the United States saw a recent Consumer Price Index reading of 9.1%, the European Union is at 9.6%, Germany is 7.6%, Spain is 10.2%, and the United Kingdom is 9.4%. The Millennial generation is unique to the United States and is the result of the Baby Boomer generation having children during their prime years. Other countries don’t have the same demographic patterns as the United States, but they are having a surge in inflation at exactly the same time. It becomes fairly obvious at this point that Millennials have become an easy scapegoat for the media in the United States for some strange reason.
Digging further and looking at home prices exclusively, Millennials made up only 37% of homebuyers in 2020 and 43% in 2021. It was Generation X, those that are currently 42 to 56 years old that are responsible for buying the most expensive homes, with a median price of $320,000. These statistics point to yet another indication that Millennials are not dominating the demand side of the housing market and certainly not at the higher price ranges. There is also plenty of evidence that home prices are being driven by demand from investors and not families. Fortune even admits this in an article by a different writer than the millennial inflation ones.
Media Counterargument on Inflation
Thankfully, Brian Sozzi, an editor at Yahoo! Finance jumped into the debate and wrote an article pushing back on the many outlandish claims being made by Bill Smead in Fortune and CNBC. Sozzi has interviewed Smead before and mentions that he isn’t surprised by his latest commentary.
A theme in Sozzi’s article points out that it is Millennials’ parents, the Baby Boomers, that are in control of just about every significant political, economic, corporate, and monetary institution in the United States and abroad. It’s very difficult to blame Millennials for runaway inflation when that generation doesn’t even have a seat at the table in which policy is made.
Covid-19 Pandemic Impact on Inflation
There are several possible drivers of the current inflation surge being seen around the world and it is quite obvious that the Millennials in the United States are simply not at the center of it. Some of those causes are cited in Sozzi’s article, but are mostly tied to the supply chain disruptions and pent up demand caused by the Covid-19 pandemic. Unfortunately, the most recent historical pandemic we have to compare the current situation to occurred in 1918/1919 and coincided with World War 1. It would be very difficult to isolate the inflation impact of the 1918 pandemic versus the impact from a massive war effort.
The Covid-19 pandemic will have caused the most significant economic shift we are likely to see in our lifetimes. The global supply chain is like a highly choreographed dance routine with a dance floor full of participants. If several of those dancers break the routine, they begin bumping into others, and then they bump into dancers near them and so on. When the global supply chain is disrupted in such a way, the damage becomes widespread and difficult to quickly resolve.
As demand returned in many sectors of the economy, that supply chain was still a mess from the Covid-19 disruption and supply of goods just couldn’t keep up. This has naturally led to higher prices as consumers emerge from the “worst” of the pandemic and are eager to travel, buy new cars, homes, and electronics while the supply of those things is still severely curtailed.
The truth is, many white collar workers did save a lot of money during the pandemic. They were able to work from home and save a considerable sum on commuting and workplace meals. I have personally experienced this. I began The Money Sloth blog in the summer of 2020 and documented my savings and net worth changes over that time. The elimination of the need for me to work in the office is certainly a contributor to my net worth increase over the past two years.
Now, many of those who saved money during the pandemic are itching to spend it and demand is soaring. I’ve heard more than one person say they are doing it because they “deserve it” after two years of no travel or “fun.” Unlike many others though, I am not suddenly craving to spend money on travel, new cars, electronics, or homes. But to each their own!
Millennial Controversy Drives Clicks
The only explanation for the media’s incessant targeting of Millennials for being the root cause of every negative event of the past 20 years is that it drives views, engagement, and clicks. Millennials may be infamous for supposedly ruining a lot of things, but the current economy is certainly not one of them.