Gen Z isn’t ok—that’s the official diagnosis from Oxford Economics, following a deep dive into the generation’s economic prospects. Indeed, the no-hire no-fire labor market, coupled with the asset headwinds of unaffordable housing and low wage growth, means the youngest entrants to the labor market could face “long-term scarring.”
But the outlook for Gen Z isn’t just affecting these young individuals; it’s having wider ramifications for the economy as a whole. A new report from Oxford Economics not only reveals the level of activity lost because Gen Z cannot enter the labor market, but also the cost of them still living with their parents and consuming less as a result.
The report, titled ‘The kids aren’t alright’, describes how $12 billion a year is being lost because younger people are spending less on housing, transportation, and food by living in the family home.
One of the key factors determining the outlook for Gen Z is the job market, where the hiring rate has been trending down since 2022, and now lies at 3.2%, well below its historical average and on par with the rate during the COVID pandemic.
“For young workers, the state of the labor market is the most important piece of the puzzle when determining overall economic health, as these individuals have not had the opportunity to accumulate wealth,” writes associate economist Grace Zwemmer. “Young workers are more vulnerable to economic downturns, and a weak labor market can have a lasting negative impact on wage growth and earning potential.”
Gen Z job seekers—currently aged 13 to 28—are facing multiple barriers to landing a role. With hiring tracking downward, unemployment has risen particularly fast among those with less experience, with the unemployment rate for 16- to 24-year-olds well above the national average. While America’s overall unemployment rate has sat around 4% as a three-month moving average, those in the 16-19 age bracket are contending with a 14% rate, while 19-24-year-olds average around 9%, according to Oxford’s analytics.
When breaking down the reasons for Gen Z job seekers to be unemployed in 2025, the following categories have emerged: market reentrants from college graduates, young people losing temporary roles, and those being laid off. “When labor market conditions deteriorate, young workers are often the first to be let go,” Zwemmer adds.
On top of that, the tight market means even those who do manage to get a job can’t “hop” from one contract to another to build their earnings and experience. “Young workers typically benefit from higher-than-usual wage growth early on in their career, as faster skill accumulation helps them get promoted from entry-level jobs and more job mobility allows them to switch employers to find larger pay bumps over a shorter period,” the economist continued. “But this isn’t happening this cycle. Instead, upward mobility has stalled, and wage growth has fallen most sharply for workers aged 16-24.”
Shaky foundations
A no- or low-stakes approach to the job market also means Gen Z isn’t acting in the economy the same way previous generations did at the same age. For example, without a job, younger people often lack the financial means to move out of their parents’ home and start paying for their own rent, utilities, and groceries.
“We estimate that there are an additional one million young adults aged 22-28 that are living at home with their parents, compared to pre-pandemic trends,” added Zwemmer, adding that research from the New York Federal Reserve suggests the associated drag on spending is worth $12 billion.
For those people hoping to achieve greater independence one day, there’s good news: Millennials faced a similar predicament a few decades ago. The study found that during the Great Recession, the share of young adults aged between 22 and 28 rose from 27% to 32% and remained elevated for years after—”a sign of the permanent scarring effects of weak early career earnings, as well as tighter borrowing conditions,” the report adds.
However, as of 2025, 55% of millennials own their own homes—even as prices reach record highs and mortgage rates remain elevated under the Federal Reserve rate-hiking regime.
But until there’s some easing in market conditions, Gen Z is understandably worried: “A worse perception of labor market conditions, which for young adults are the key determinants of financial well-being, is making them more pessimistic and may make them more cautious when it comes to spending,” Zwemmer concluded.
Credit: Source link
