“So, what do you do?”
“It’s kind of hard to explain.”
“Because what you do is complicated?”
“Eh… because I don’t really do it.”
A decade before Greta Gerwig set box-office records as director of 2023’s Barbie movie, she starred as a struggling, wannabe dancer in the indie flick, Frances Ha. Gerwig plays the titular Frances, a broke 27-year-old living in New York City, desperately waiting for her unlikely “big break.” Her friends are adrift and living an extended adolescence just like she is, and the film chronicles their evolution into capital-A Adults. The adage that “life happens while you’re busy making plans” rings true for the film’s characters. Aimlessness shifts into discipline, relationships mature, and the dreams of youth are confronted with reality. It’s a different kind of “coming-of-age” story, perfect for anyone caught in a “Quarter-Life Crisis” or, as a Gen Z-er might say, “crashing out.” Gerwig’s performance as the unflappable Frances nabbed her a Golden Globe nomination for Best Actress and set her on a trajectory to superstardom.
The quote atop today’s missive about “not really doing it” resonates for many young adults and recent college grads striking out in the job market. Aggregate unemployment may have only ticked up one-tenth to 4.4% in September, but the 25-34 cohort saw their unemployment rate jump four-tenths to 4.8%, tying with July 2024’s cycle high (blue line). Meanwhile, for the youngest adults, aged 20-24, unemployment remained a cycle high 9.2% for a second straight month, a level that coincided with the start of the Great Recession (red line). Many newer entrants to the workforce were told that getting a “safe” Business or STEM degree would ensure them job security. No surprise, they’re not optimistic about their prospects. University of Michigan (UMich) Higher Unemployment Expectations for ages 18-34 jumped nine points in November to a record high 78% (green line). In data to 1978, the sole precedent at this level was May 1980, amidst the double-dip recession.
Unsurprisingly, joblessness expectations for 18–34-year-olds have trended north alongside Bad News Heard about Unemployment. November saw a 13-point jump to 40% (yellow line). Not only is this a cycle high; but, this threshold has been crossed in every recession over the last half-century. News articles and thought pieces about the plight of young workers fill the wires and airwaves. Back in July, the Burning Glass Institute, a think tank specializing in workforce research, published a report titled “No Country for Young Grads,” which cites several structural forces harming job prospects for twenty-somethings: 1) AI being leveraged at the expense of entry-level positions, 2) employers becoming more risk-averse in hiring since COVID, and 3) a larger supply of graduates entering the workforce. Recent headlines leave current college students keenly aware of what’s in store:
- Harvard Crimson, November 19th: “Harvard is Training Us for a World That No Longer Exists”
- Cornell Daily-Sun, November 18th: “Unemployment is a Full-Time Job: Recent Grads Struggle to Navigate a Difficult Job Market”
- The Michigan Daily, October 8th: “AI is Coming for Our Jobs”
Shifting gears from the plight of the youth to the top two income terciles, who drive the lion’s share of consumption, an income shock has manifested. UMich’s Current Finances: Income gauge, which measures the spread between consumers reporting higher vs. lower incomes, fell 17 points to a net -19 in November for the middle-income cohort, a cycle low (purple line). Meanwhile, for the upper-income cohort, this spread fell 14 points to -8, the first negative print since December 2012 (fuchsia line). The combined one-month decline of 31 points across the two groups is the fifth-largest on record and the steepest since April 2020. Today’s depths of negativity have only been seen during the Great Recession and its initial aftermath.
Weaker holiday spending and travel plans validate the UMich signal. PwC’s Holiday Outlook Survey forecasts a 5% drop in average holiday spending, the first decline since 2020. Meanwhile, Deloitte’s annual Holiday Travel Survey found that 54% of Americans plan to hit the road or the skies this winter, up 5 points from 2024, but plan to spend an average of $2,334, an 18% decline from last year. Per the results, “high-income survey respondents (those making $100,000 or more per year) are expected to pull back the most.”
Services firms are expecting a pullback from their customers—at least, the ones in the Federal Reserve’s Tenth District, which covers Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri. The Kansas City Fed’s November Services Survey (taken after the government shutdown ended on November 12) flagged that activity “decreased moderately… and is expected to stay fairly flat in the near-term.” Future Selling Prices sank nine points to a net 18%, less than half of April’s local high of 43% and a sign of weakening pricing power (aqua line). Similarly, softer expected demand was evident in reduced headcount needs: Future Employee Hours Worked dipped from -8 to -14, the lowest since April 2020 (red line). After surging this spring, Future Inventories have also collapsed to -5 (teal line). Of the sample quotes provided from surveyed service providers, several called out uncertainty as hindering their ability to grow.
Our final chart is care of S&P Global’s U.S. Flash PMI, which hit the wires on Friday. Focusing on the manufacturing side of the release, the demand outlook proved murky, even as both the headline PMI (51.9) and Output (53.6) gauges remained in expansion. At -3.9, the New Orders-Finished Goods Inventories spread was negative for a third straight month and marked a 15-month low (green line). Meanwhile, Quantity of Purchases fell from 50.1 to 49.4, back into contraction for the first time since April (pink line), and Backlogs, at 49.4, remained underwater for the 36th time in 38 months (sky blue line). S&P Global Chief Economist Chris Williamson remarked that the “accumulation of unsold inventory hints at slower factory production expansion in the coming months unless demand revives, which could in turn feed through to lower growth in many service industries.” In other words, just like Frances, the industrial sector still isn’t dancing.