Millennials can’t get enough of Starbucks’ $4-and-up coffee
If you buy into media stereotypes about millennials, you probably believe the following about the infamous Generation Me. They’re under-employed. Bummed out about work prospects. And, as a result, holed up in their parents’ basements.
But thanks to an impressive surge in jobs in the past two years (which you may have missed because of the barrage of stereotypes), many millennials are actually hitting their stride in life.
Now, as they enter their prime spending years, the implications could be big for the economy. In short, millennials may help the economy grow faster than many analysts think, says James Paulsen, economist and market strategist at Wells Capital Management.
Their newfound employment strength will also help companies that cater to their needs and lifestyles — such as TV-streaming company Netflix Inc. NFLX, -0.64%coffee chain Starbucks Inc. SBUX, -0.94% a small cosmetics company called e.l.f. Beauty Inc. ELF, +1.38% and seven others I mention below. Home builders may finally get a burst of growth from millennials, though that remains to be seen.
First, the facts, as stereotypes die hard.
- Since January 2014, employment among millennials (25- to 34-year-olds) grew 7%, to 33.9 million. That was far more than the overall 4.6% growth in the number of workers in the economy, to 151.9 million. Here’s another way to put it: Millennials got 33% of the 6.74 million new jobs added, even though they account for only 22.4% of the number of people working. In contrast, employment among 35- to 54-year-olds was flat. Boomers, ages 55 and up, saw 9% job growth.
- Probably as a result of the jobs gains, consumer confidence among millennials continued to surge in the past year, even as it flagged among boomers. This bodes well for our economy, which is two-thirds driven by consumer spending.
Both of those trends are “definitely a plus for the economy,” says Chris Christopher, director of consumer economics at IHS Global Insight, an economics research and forecasting firm. “Especially as the millennials start getting married, they are going to have children and that will add even more spanning,” he says.
One qualifier here is that millennials have a lot of student debt. But this headwind will probably diminish with time, as people tend to pay off most of their student debt in about 10 years, and as their employment situations continue improve, says Samuel Sturgeon, of Demographic Intelligence. “Student debt becomes less oppressive over time because people pay it down, and because they get more established in their careers.”
Here are 10 companies that should benefit from robust job growth among millennials, generally defined as people born between 1982 and 1994. (Fun fact: This means they were the first to graduate high school in the new millennium, hence their nickname.)
Retailers
Do millennials like to shop? Of course. “The idea that millennials are not materialistic, I don’t know where that comes from because all the data contradict it,” says psychologist Jean Twenge, author of “Generation Me: Why Today’s Young Americans Are More Confident, Assertive, Entitled — and More Miserable Than Ever Before.”
One problem here for investors is that millennials aren’t very loyal to brands. They make a lot of purchase decisions based on research conducted online. “Their favorite brand is what their smartphone tells them is the best product at the moment,” says Scott Galloway, a marketing professor at New York University’s Stern School of Business.
A way around this is to own Amazon.com Inc. AMZN, -0.23% and its de facto partner, FedEx Corp. FDX, -0.09% says Trip Miller, managing partner of Memphis-based Gullane Capital Partners. These companies also play into the millennial desire for instant gratification.
But millennials do favor certain brands, maintains veteran retail analyst Howard Davidowitz of Davidowitz & Associates, a retail consulting and investment banking firm in New York. He cites Nike Inc. NKE, -1.58% and Under Armour Inc. UA, +0.09%
‘Non linear’ companies
Millennials are a “non linear” generation, says Galloway. “They want what they want, when they want it. Especially media,” he says. “They want to consume media on their own terms.” They hate the idea of letting networks or cable companies decide when a movie or sitcom is available. The investment play here? “Netflix is the brand that embodies this trend,” says Galloway.
Starbucks
A recent look at millennial spending by Toronto-Dominion Bank found that they buy coffee way more than other age groups. “Our grandparents liked scotch. Our parents liked marijuana. And millennials are addicted to coffee,” quips Galloway.
