The trend: A perfect macroeconomic storm is causing younger consumers to cut back on spending.

What’s driving the trend:

• Labor market strain. Recent college graduates (ages 22 to 27) face a 5.8% unemployment rate, per the New York Fed. That jumps to 6.9% when including all consumers in that age group.
• Rising student loan pressure. The federal government has resumed collections for over 5 million borrowers in default, and wage garnishment is set to begin later this summer for nonpayers. Student loan defaults could reduce consumer spending by as much as $63 billion annually, per Bloomberg Economics.
• Debt trouble. Credit card delinquency rates are now the highest since before the pandemic—with the worst rates among 18- to 29-year-olds, per the New York Fed.
• Cost-of-living squeeze. While younger consumers’ wages are rising, so are their expenses. Gen Z and millennials make up an outsize share of child care, rent, student loan, and vehicle payers compared with other demographic groups, per Bank of America Institute.

The impact: Young adults are spending less: In-store and online spending among 18- to 24-year-olds dropped 13% YoY between January and April, per Circana.

Our take: These pressures aren’t going away anytime soon.The Trump administration’s tariffs are leading retailers like Walmart, Best Buy, and Macy’s to raise prices—putting even more strain on young shoppers already feeling stretched.

At the same time, job anxieties are growing. The white collar workforce is shrinking, and more companies are citing AI as a reason for layoffs.

Put it all together, and it’s likely that younger consumers will remain cautious with their spending for some time, especially on nonessentials. Retailers that want to win over this group will need to focus on offering value such as high-quality, private label products.