What Generational Cohort Is Driving Inflation the Most?

They put avocado on their toast and use their phones for everything but making phone calls. Ladies and gentlemen, let me introduce you to a key inflation driver: millennials.  

While supply disruptions have undeniably helped push up prices, demand also has driven up inflation. Millennials, in particular, are playing a key role in fueling demand. To understand the current level of inflation, one must understand the making of that generation. 

Millennials are defined as those born between 1981 and 1996. They make up the largest cohort of the current U.S. population with the largest spending power.  

Some millennials entered the workforce in the Great Recession with massive student loans. They delayed life milestones—from marrying and having children to buying a home—partly because they were financially behind. When older millennials finally reached a financial status that would afford them the opportunity to buy a home and make other big purchases, COVID-19 changed the world as we know it.  

The Federal Reserve and the federal government injected money into the economy, resulting in too much money to chase too few goods—including in the housing market. Home prices hit a record high this year. Although prices are slowly coming down, high mortgage rates make monthly payments unaffordable for many.  

Once again, millennials are saying goodbye to the American dream. 

However, they are driving inflation because of the size of their population and the nature of their demand. Unlike older generations that already have purchased long-term necessities such as cars and housing, millennials have reached the age where they can no longer delay such consumptions.  

Those who have missed the opportunity to buy a home are spending their money on rent, fueling rent inflation. The money that otherwise would have gone toward a down payment for a home they are unable to afford in the current economy is also being spent on things millennials are known to enjoy, such as dining and travels, where inflation is more noticeable.  

Before you blame millennials for their spending habits, remember that this generation has spent their early adult lives living through three once-in-a-lifetime crises: the Great Recession, a global pandemic and a war that threatens Europe’s ability to keep the lights on.  

They do have it hard.