That's according to Ed Yardeni, a market veteran who explained why he thinks recession predictions are misguided. Among the main factors discussed are the generation's growing consumption habits, amplified by the transition to retirement.
“More importantly, the baby boom generation has begun to retire with a record net worth of $76 trillion,” he wrote for the newspaper. Financial Times. “They are spending on restaurants, cruises, travel and health care. All of these service sectors have increased their payrolls, increasing their real incomes and fueling more spending.”
This goes against the dark expectations of a imminent slowdown in consumptionwhich served as the basis for reasoning that the economy would eventually collapse.
Instead, only the goods sector showed signs of a growth recession, Yardeni said. But that’s after the hard-to-beat lockdown shopping frenzy; today, spending on goods remains at a record high when adjusted for inflation.
It's a new vision of what the post-war generation can offer, given that retirees are often portrayed as a source of economic tension on the youngest. With 4.1 million struck every year until 2027some fear it will weigh on everything from stocks to the job market.
But for Yardeni, this is the reason why no consumer recession has emerged in the past two years, he wrote separately in April:
“Boomers watched a lot of Star Trek in the 1960s. They certainly took Spock's mantra to heart.”Live long and prosper.' He should have ended his thought with, “So retire and spend it all before your expiration date.”
Retiree consumption is one of several recession-canceling factors listed by Yardeni in the FT.
He said analysts were right to initially expect a slowdown, given the Federal Reserve's aggressive hike cycle and flashing recession indicators.
But the problems typically caused by restrictive monetary policy, such as the credit crunch and the speculative bubble, have largely been overcome. While a the banking crisis emerged last yearthe Fed's emergency response was enough to crush the credit fallout.
What's more, rising rates have actually strengthened consumer resilience, as households have accumulated higher returns on their bank deposits and money market funds.
At the same time, baby boomers' focus on spending on services may also have distorted the indicators, making the situation appear bleaker than it actually is.
“And what about the Index of Leading Economic Indicators?” » said Yardeni. “It hasn't worked very well because it's heavily weighted toward the goods economy, which has been relatively weak, and it doesn't give enough weight to the services sector, which has been strong.”
Correction: May 22, 2024 — An earlier version of this story misstated the net worth of baby boomers. Ed Yardeni said baby boomers are retiring with $76 trillion in net worth, not $76 billion.