Recently, I came across an article that stated the Baby Boomers (those born after World War II until the early ’60’s) were born at a fortunate time in economic history. The United States was going through one of its most prosperous times with jobs plentiful and salaries ever increasing. Baby boomers not only were more educated than their ancestors, but they had disposable income to spend on luxury items. This time period gave birth to what we know as the great “American Dream”: one house, two cars in the driveway, extra income, and enough of a work force to fund the fairly new Social Security retirement fund. Times were grand.
*Side note: There was a civil rights movement going on during this time, so not everyone will agree that the boomer generation was a prosperous time.
On the flip side, the baby boomers’ children, mostly born in the 1970’s and ’80’s, were born at a time of decreasing prosperity riddled with recessions every 5 or so years. These are the Gen X and Gen Y members of society that were hit hard by recent recessions. With limited amounts of time to make up for dips in the economy, if these folks didn’t time purchases and investments just right, they lost big on the back end (housing bust and stock market crash).
Okay, so maybe I’m sounding a bit “woe is me” right now, but let’s take a look at some recessions over the years:
– Prior to 1970, there were a handful of recessions during the great prosperous period, but none of them lasted for more than a year. The GDP (gross domestic product) during these short recessions dropped between less than one percent to almost four percent and unemployment stayed below eight percent.
– The recession of 1973 lasted longer than a year, the GDP dropped 3.2% and unemployment hit 9%. Gen Xer’s were either in diapers, or not born yet.
– 1980 – 1982, two back-to-back recessions that were caused by adjusting for the inflation of the 1970’s and the Iranian Revolution affecting the oil supply. Though the GDP didn’t dip much (less than 3% for each recession), unemployment zoomed up to 10% and these two recessions combined lasted two years. The Gen Yer’s were in diapers while Gen Xer’s were in primary school.
– In the 1990’s there was a short and mild recession, though some states were hit harder by the decrease in the aerospace industry. Over all, the recession lasted a few short months and unemployment stayed below 8%. Gen X was graduating high school (or getting close) and entering college. Gen Y was in primary school.
– 2001: Dot.Com Bust and 9/11. Technically, there were 10-full years of recovery without a recession between 1991 and 2001. If the Gen Xer’s timed purchases and investments correctly, they weren’t affected by the technology bust. However, for some of us that were just getting in on the tech wave, our timing was awful! On paper, this recession looks mild, but if you lived an area where the tech bubble was bursting, it wasn’t so great. Gen X was turning 30 (or close to it) and the Gen Y population was around 20.
– The Great Recession, 2007. By far the worst recession since the Great Depression, the GDP dipped 4.3% and unemployment increased to 10%. Though the recession ended in 2009, many people felt the repercussions many years later (and still do). Only this past year did unemployment fall below 8%. Gen Xer’s were 30-40 and many lost their homes, while Gen Y may have had difficulty securing employment during such high unemployment rates.
Of course, no one recession can make or break someone’s finances. For Gen X and Gen Y, we technically still have some time to make up for the losses. However, Gen X is running about a decade behind depending on how hard hit they were during the Dot.Com bust and the housing bust. Not that the boomers went unscathed. Those that cashed out home equity or lost a job were just as disadvantaged. Yet, they had many previous decades of built up wealth to cushion the blow (hopefully).
The bottom line from all this is: make smart decisions. Sure, we can’t all time investments right (no one has an accurate crystal ball), but we can make our own personal finance a bit more recession-proof. Stash away cash, invest for the future, and don’t get too caught up in current trends (everyone’s doing it, so I’m gonna do it too!).
Were you affected by any of these recessions? As a Gen X or Gen Y adult, do you feel short-changed, or fortunate? As a boomer, do you feel lucky?