Monthly Issue
From Home Furnishing Business
March 12,
2018 by Jane Chero in Business Strategy, Industry 
Couple these demographic shifts with industry workforce needs in a changing e-commerce environment, and the U.S. workforce could be in for a wild ride in the not so distant future, according to projected data by the Bureau of Labor Statistics released in the fourth quarter of last year.
In addition to slow growth in the labor force, changes in the way consumers purchase products via e-commerce will dramatically shift the need and type of workers in many industries, especially retail. Not since the exodus of consumer goods manufacturing from the U.S. will the need for workers be so impacted.
Industries are changing and growing alongside the population. As shown in Table A, the retail industry is adapting to a changing economic structure and many brick and mortar stores are forecasted to decline in employment over the 10-year period 2016 to 2026. Among these are traditional furniture stores, as well as electronic, department and clothing stores. Furniture Stores are expected to take a 10.2 percent negative hit in employment over the 10 years to 2026. Meanwhile the success of Home Furnishings Stores is expected to boost this channel’s employment 7.4 percent. In the same time period, Electronic Shopping and Mail-Order Houses are expected to gain 23.4 percent more employees.
The Labor Force 2026
How will the Labor Force look by 2026? And will there be enough workers to meet the specific needs of American industry? In 1996 all Baby Boomers were within the prime 25 to 54 age segment – roughly 72 percent of the total labor force. Thirty years later, projected in 2026, Baby Boomers will be 62 to 80 years of age and many will have exited the job market – leaving just 63.5 percent of the labor force between 25 to 54 years old (Table B). Between 2016 and 2026, the other significant change to the workforce will be among 35 to 44 year olds as the Millennials dominate this age group, growing from 20.6 percent of the workforce in 2016 to 22.2 percent by 2026. They will be the only age group under 65 to gain share of the workforce.
Figure 1 shows the percent change of the workforce by age group. Of particular note is the continual decline in workers ages 45 to 54, tempered by the growth in the 35 to 44 group.
The growth of both men and women in the labor force plummeted after 2006, due to both the recession and a slowing population growth. Although not the fast rise seen between 1996 and 2006, labor force growth is expected to increase for both sexes between 2016 and 2026, 5.3 percent and 8.0 percent respectively (Table C). The forecasted boost of women in the labor force brings their percent distribution up to 47.4 percent in 2026, but men remain in the majority at 52.6 percent (Table D).
Due to the influence of immigration on population growth and the projected rise of participation rates among Asians and Hispanic immigrants, the labor force is expected to become more diverse. As the current population ages, the growth of White non-Hispanics in the labor force will decline further after falling 3.6 percent from 2006 to 2016 with an additional projected drop of 2.4 percent over another decade (Figure 2). As shown in Table E, both the Hispanic and Asian groups will increase their share of the labor force to 20.6 percent and 7.2 percent by a projected 2026.
Figure 2 shows the percent change in the labor force by race for the 10-year segments. Note the large Hispanic growth that occurred between 1996 and 2006.
As the younger generation’s participation in the labor force declines, and the workers over 65 increases, the median age of the Civilian Labor Force is projected to continue upward. Regardless of race, the median age of the labor force has climbed since 1996 and by 2026 all races are expected to have a median age above 40 with the exception of Hispanics at age 39.3 (Table F).
Labor Force Participation
Civilian Noninstitutional Population
Refers to people 16 years of age and older residing in the 50 states and the District of Columbia who are not inmates of institutions and who are not on active duty in the Armed Forces.
Labor Force
Labor force is the sum of employed and unemployed persons (actively looking for work).
Civilian Labor Force Participation Rate
The labor force participation rate is the labor force as a percent of the civilian noninstitutional population over age 16.
The labor force participation rate is the percent of the people working or looking for employment, divided by the total number of people over age 16. There are many reasons adults do not work. Some are too old or ill. Others chose to stay at home with children. Some have dropped out of the workforce and are no longer looking for employment. Others are unemployable for various reasons. Data from the Bureau of Labor Statistics in the fourth quarter of last year paints a picture of varied growth patterns in labor force participation rates among different age, gender, race and ethnic groups. These participation rates highlight some the economic and social frustrations in America today as government entities, education leaders and communities struggle to find solutions.
While growth continues in both the adult civilian population and labor force, as discussed earlier, the rate has slowed and is projected to continue to slow (Table G). In the 20-year period between 1996 and 2006, both grew at about the same rate – 1.3 percent average per year for the population over age 16 versus 1.2 percent labor force growth. However, during the 10-year period of the Great Recession and subsequent recovery 2006 to 2016, the rates got out of whack, with the civilian population over 16 years of age growing on average 1 percent annually while the labor force grew only half that rate. The gap between the civilian population over 16 and the labor force population (those working or looking for work) will narrow only slightly in the years ahead to 2026 (Table G).
Depicted in Table H the large 65 plus older total population is on course to grow exponentially from 2016 to 2026 with most leaving the workforce. And while age segments 25 to 34 and 35 to 44 show growth during this decade, the number of 16 to 24 year olds is expected to decrease alongside 45 to 54 year olds. Those ages 55 to 64, many still choosing to stay longer in the workforce, projects a flat population growth.
As the labor force gets older, the overall labor force participation rate is projected to decrease – down to 61 percent by 2026 (Table I). But the individual age groups are of particular interest. For the youngest age group 16 to 24, participation in the workforce declined steadily each 10-year span – from 66 percent in 1996 to a projected 53 percent in 2026. This decline in workforce participation is associated in part with a lower high school dropout rate and increased attendance at colleges, all positive factors. In fact, in many retail labor markets, senior citizens are filling the slots once held by teens and young adults.
Most worrisome, however, is that labor force participation rates among 25 to 54 year olds have trickled down, but all still expected to be above 80 percent in 2026. And while population numbers for 55 to 64 year olds are projected to hold at 41.3 million over 10 years, the labor force participation rate is expected to increase by 3 percent with more people working longer. For seniors 65 to 74, the Bureau of Labor Statistics predicts 30 percent will still be working in 2026.
The labor force is taking a huge hit with men leaving or not returning to the workforce. At a 74.9 percent labor force participation rate in 1996, the rate for men is projected to fall 11.6 percentage points to 66.2 percent by 2026 (Table J). However, contrary to strides being made by women in the workforce, just 56.1 percent of adult women 16 and over are expected to be in the labor force by 2026 – down 5.4 percentage points since 1996.
The workforce participation decline among women is only in two age groups – 16 to 24 and 35 to 44 year old women. Many in the 16 to 24 year old group are among the population staying in high school and then attending college. The 35 to 44 age group in part reflects women who have delayed marriage and child birth and who have exited the workforce to stay at home. The declining participation in this age group is expected to stabilize to 2026. Interestingly, these women are projected to return to the workforce by 2026 as demonstrated by the 45 to 54 year age group which will have the highest labor participation rate of any female age group at 76.4 percent.
Workforce participation rates were highest in 2006 just prior to the Great Recession in all race and ethnic groups, except White, non Hispanics (Table K). Rates in 2016 are projected to continue to decline among all race and ethnic groups from 2016 to 2026 as the population ages with the exception of Hispanics. Hispanics have more of its adult population under the age of 65 than any other race or ethnic group and are less impacted by the aging workforce. Hispanics have the largest percentage of its adult population ready to work at 65.9 percent, with Hispanic men having the highest participation rate of any sex or race at 74.4 percent.
In its purest form, full employment implies that any person wanting a job has one. The issue with employment data is that the Civilian Labor Force definition leaves out the number of people not looking for employment. These are the hidden numbers that are a challenge to economic growth.
The Bureau of Labor Statistics uses the Economic Dependency Ratio to highlight the impact of the non-employed which they define as the ratio of the number of people in the total population who are not in the labor force, per 100 of those who are. This is the portion of the population “dependent” on the working population. The BLS projections for 2026 highlight the growing economic pressure of the aging population on those in the workforce. Figure 3 shows that growth in the dependency of ages 65 and over will increase from 24.9 people per 100 workers to 30.9 older Americans. Even so, seniors still have the lowest dependency ratio. The dependency ratio of 16 to 64 year olds not in the labor force increased steadily to 2016, but is projected to lessen slightly by 2026. In 2026 there will be an estimated 35 Americans between the ages of 16 and 64 who are not working per 100 American in the labor force. Children under 16 still have the highest dependency ratio, but it has declined from 45.4 per 100 to a projected 2025 ratio of 38.9.
A high dependency ratio can exacerbate the problems a government faces in health, social security & education costs, which are most used by the youngest and the oldest in a population.
February 13,
2018 by Jane Chero in Economic News, Industry
Since the turn of the century, diversity in America has continued to grow – impacting the political climate, education and the economy. One common thread in the home furnishings industry is that all Americans need and purchase home furnishings, regardless of ethnicity. However, understanding the components of diversity adds perspective to our retail landscape.
In the timeframe of six years 2010 to 2016, the U.S. resident population grew 4.7 percent – from 281.4 million to 323.1 million. As shown in Table A, all races grew in number but only White (Non Hispanics) have lost share of the population.
Census Bureau Race Classifications
White (Non Hispanic) encompasses Europe, the Middle East, and North Africa. Per the Census Bureau classification, people from the Middle East are considered White. There are an estimated 3.6 million Arab-Americans in the United States, but that doesn’t include other ethnic groups that could put the total Middle Eastern and North African population above 10 million. According to the Census Bureau’s American Community Survey about one million people from the Middle Eastern region are first-generation immigrants to the United States.
White Hispanics are not considered a “race” by the U.S. Census Bureau but an “ethnicity”. For the purpose for this report, White Hispanics have been broken out into its own classification.
Asians include persons from the Far East, South Asia, and Asian Indian.
Other race or ethnic classifications are Black/African American, American Indian or Alaska Native, Native Hawaiian Island or Other Pacific Island, and 2 or More Races.
Population Growth by Race or Ethnic Group
Whites (Non Hispanic) represent 61.1 percent of the population in 2016, down from 69.1 percent in 2000 and 63.9 percent in 2010. Meanwhile, White Hispanics already surpassed Blacks and African Americans in number by 2010 as the second largest ethnic group. In 2016 White Hispanics grew to 15.6 percent of the population compared to 13.3 percent for Blacks and African Americans. Asians, the fastest growing ethnic group in the U.S., grew from 3.6 percent to 5.7 percent of the population in 2016 (Table B).
The U.S. added 14.4 million additional residents between 2010 and 2016. By far, White Hispanics added the most at 5.9 million followed by Asians at 3.2 million, and Black/African Americans at 2.7 million. Of note is that while mixed-race persons represent only 2.6 percent of the U.S. population, in the six-year period they grew by an additional 1.5 million persons. Meanwhile, Whites (Non Hispanic) added just 643,174 residents to the total population in six years (Table C).
As shown in Table D, the contribution to population growth 2010 and 2016 came primarily from the White Hispanics, 41.2 percent of the total. But the one-year growth rates in 2010 to 2011 and more recently 2015 to 2016 illustrate the growing contribution of Asians to the population who represented 14.8 percent of the growth 2010 to 2011 but jumped to 23.9 percent 2015 to 2016.
The 14.4 million new residents to the U.S. population 2010 to 2016 account for an overall 4.7 percent growth as shown in Table E. Persons of 2 or more races was the fastest growing category increasing 21.4 percent to a total of 8.5 million residents or 2.6 percent of the population. Asians, at only 5.7 percent of the population in 2016, increased 20.8 percent in the six-year period and White Hispanics grew 13.3 percent. Whites (Non Hispanic) and Blacks/African Americans experienced the lowest growth at 0.3 percent and 6.8 percent respectively.
Natural Increase vs. Foreign Immigration
A resident population grows by two methods: (1) Natural Increase, which is the net result of births minus deaths, and (2) Net Foreign Immigration. Of the 14.4 million additional residents over the six-year period since 2010, 59.3 percent of the growth can be attributed to Natural Increase and 40.7 percent to Foreign Immigration (Table F).
Natural Increase
For the White (Non Hispanic) population, Natural Increase (births minus deaths) has been negative since the early 2000s meaning more have died than were born. Between 2010 and 2016, Whites (Non Hispanic) experienced a net natural decrease of 397,697 residents. As the aging Baby Boomers continue to die in record numbers and younger Millennials delay childbirth, this decline is expected to escalate.
By far, the much younger White Hispanic population has the greatest net result of births minus deaths accounting for over half of the Natural Increase of the total population occurring between 2010 and 2016 (Table G).
For the six-year period, the Birth to Death Ratio (the number of births per death) totaled 1.5 for the entire United States. Both younger ethnic groups in the U.S., the White Hispanic population and Asian population have much higher rates of births versus deaths – 5.8 and 3.4 in a six-year period (Table H).
The impact of the aging White (Non Hispanic) population is shown in Table I. Whites still represent 61 percent of the population and 50.1 percent of all births. However numbers of deaths are overwhelming among Whites (Non Hispanic) totaling 78.8 percent of all deaths 2010 to 2016. This negative Natural Increase trend among Whites (Non Hispanic) is expected to continue for years to come. Meanwhile, the younger White Hispanic group 2010 to 2016 represented 22 percent of all births, but only 5.7 percent of deaths.
Net Foreign Immigration
Net Foreign or International Immigration accounts for 40 percent of the population increase 2010 to 2016 growing the U.S. population by 2 percent. During that time foreign immigrants added an additional 5.8 million people over six years. In 2016 alone the U.S. experienced a Net Foreign Immigration of almost one million (999,163 persons) compared to 703,824 in 2011.
White Hispanics represented the largest chunk of immigration in the early part of this decade representing 46.4 percent all Net Foreign Immigration in 2011. However, by 2016 that number had fallen significantly to 24.1 percent.
The biggest growth in Net Foreign Immigration has come from Asians who represented 24.3 percent of all immigrants in 2011 but 39.9 percent in 2016. In the six-year period, 2.3 million Asians immigrated to the U.S. compared to 1.3 million White Hispanics, 1 million Whites (Non Hispanic) and 851,355 Blacks. Table J shows the percentages.
For furniture and home furnishings retailers, the broadening ethnic diversity of U.S. households presents unique opportunities for products that address the cultural tastes and preferences of these new residents.
January 19,
2018 by Jane Chero in Business Strategy, Industry
Big and Small America is a term coined by the Census Bureau to reflect the present geographical spread of the American population. Over 50 percent of residents live in just 143 counties (Big America) with the remaining 50 percent spread out over a vast area encompassing 2,999 additional counties (Small America). The following map (Figure 1) shows the 143 highlighted most populous counties.
The migration to populous counties is in part due to more workers seeking jobs in large cities as manufacturing jobs have left the U.S. Along with greater job opportunities, the lure of warmer climates has drawn Americans to the southern and western states. The most growth has been seen in regional hub areas and coastal areas with ports. Southern and Western areas along with larger cities have also been impacted by Immigration.
As shown in Figure 2, 50 percent of the population lives in 4.6 percent of counties – roughly 161.7 million residents. These Big American counties average, 485,846 in population. Medium sized counties average 211,321 persons and house 10.7 percent of the nation. Very small U.S. counties totaling 2,664 represent 84.8 percent of counties and the remaining 25 percent of the population. Small counties average only 20,402 in population.
Also surprising is that over 10 percent of the population resides in just seven counties, three of which are in California (Table A). By far, Los Angeles County is the nation’s most populous with over 10 million residents in 2016. With just half the size (5.2 million), Cook County, IL has the second highest population, followed by Harris County, TX, Maricopa County, AZ, San Diego County, CA, Orange County, CA, and Miami-Dade, FL.
The rate of growth further contrasts Big America versus Small America. The U.S. population increased by over 2.2 million between 2015 and 2016, yet almost half (49.0%) of the U.S. counties lost population. For small counties, 54.1 percent lost residents, while only 17.5 percent of big counties diminished (Table B).
For Small counties, 450 lost over 1 percent of their population between 2015 and 2016. Meanwhile, only seven Big and Medium sized counties declined 1 percent or more (Table C). The big county on the list, Baltimore County, MD, lost 1.08 percent of its residents from 2015 to 2016. Ector County, TX home of the city Odessa, TX topped of the Medium counties – decreasing population by 1.39 percent.
Counties in Texas lead the way in largest percent of population growth with the top two increasing counties located within the Austin-Round Rock, TX Metropolitan Statistical Area – Williamson County (5.09 percent) and Hays County (4.19 percent). Comal County, TX added 4.40 percent more residents to the San Antonio-New Braunfels, TX market. Southern states rounded out the list of counties gaining over 4 percent of population in 2016 (Table D).
Another current key geographic characteristic worth noting has to do with the staggering population density in the Northeast, notably in the New York-Jersey City-White Plains, NY-NJ MSA in five key counties. With the exception of San Francisco County, CA, the Northeast contains the most congestion of people with Boston, MA, Philadelphia, PA and Washington-Arlington-Alexandria, DC-VA-MD-WV MSA’s all containing over 11,000 people per square mile (Table E).
Meanwhile, the vast areas of California, Nevada and Arizona make the density in their counties less than .05 percent as dense as the Northeast (Table F). For example, New York County (New York City) has almost 72,000 people per square mile living in the county, compared to 2,500 in Los Angeles County, the largest county in population in the U.S.
As the map in Figure 3 shows, fourteen states have no Big counties: Alaska, Arkansas, Idaho, Iowa, Louisiana, Maine, Mississippi, Montana, New Hampshire, South Dakota, North Dakota, Vermont, West Virginia, and Wyoming.
By comparison, there are 17 states with a majority of residents living in big counties. Massachusetts and New Jersey have the highest percent of Big counties – 50 percent and 47.6 percent respectively. California has the most big counties at 17, followed by Florida and Texas, both with 12. In contrast, states with the highest number of small counties are Texas (223) and Georgia (141), while states with the highest mid-sized (medium) counties include Florida (21), Pennsylvania (20), North Carolina (19), and California (17).
Total U.S. population grew only 0.7 percent last year, with immigration contributing about 45 percent of that growth. Although population growth was slight, 84.3 percent of states experienced increases, leaving 15.7 percent with a decrease (eight states). Table G shows the states with over 1 percent growth in 2016. Utah and Nevada topped the list with 2 percent growth. Two highly populated states, Florida and Texas continued to grow.
Population in three big northern states, New York, Pennsylvania, and Illinois decreased alongside less populated states like Wyoming, Vermont, and West Virginia (Table H).
Slightly less than one million people immigrated to the U.S. last year, down 3.6 percent from 2015. They represented about 45 percent of U.S. population growth. As shown in Table I, big counties were the major recipients with 74.1 percent of immigrants residing in highly populated areas.
Short of at least some manufacturing jobs returning to the U.S., the divide between Big and Small America should accelerate, with metropolitan areas continuing to spread. Along with a majority of the immigrant population settling in the south and west, Americans in general will continue to gravitate to big counties that have warmer climates, job opportunities, and desirable cost of living.
December 18,
2017 by Jane Chero in Economic News, Industry
The top 20 percent of all households make over half (52.8 percent) of all income and pay 78.5 percent of all taxes. This still leaves these households who make over $105,600 per year with 48.6 percent of all disposable income. As would be expected, the lower income families spend a higher percentage of their income on food, shelter, utilities, gasoline, and healthcare, leaving less disposable income for non essentials. However, surprisingly, when it comes to home furnishings and equipment, the disparity in percent of income spent between the ranges does not vary significantly.
The annual mid-year Consumer Expenditure Survey report (mid 2015 to mid 2016) by the Bureau of Labor Statistics divides the 129 million households in the U.S. into 20 percent quintiles of around 25.8 million consumer units each from the lowest to highest earners. Not surprisingly, the majority of income earned before taxes along with the tax money generated and disposable income after taxes belong to households in the top quintile.
Income Groups
As shown in Table A, over three-fourths (75.4 percent) of total income comes from the top two quintiles. The average income for the highest 20 percent is $192,051 before taxes and the second 20 percent of average $82,561. The remaining three income segments make up 60 percent of U.S. households and earn less than $63,800. They account for under a quarter (24.5 percent) of all household income.
The majority of tax dollars, 78.5 percent, comes from the top income segment (Table B). And although the highest earning households pay on average 20.6 percent of their income to taxes, their share of total U.S. income after taxes is still at 48.6 percent, down from 52.8 percent before taxes. Paying roughly 10 percent of income to taxes, the fourth 20 percent quintile has an average of $73,827 of income after taxes – maintaining 23.5 percent share of all disposable income.
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After taxes, the bottom three earning households bumped up to 28 percent of total disposable income but much of it will be swallowed by the essentials like food, shelter and healthcare. (Table C)
Household Characteristics
There are distinct household characteristics that separate the income levels as depicted in Figure 1. Most notable is that the higher the income level, on average the more people in the household. The highest 20 percent have almost double the number of people (3.1 persons on average) compared to 1.6 persons on average in the lowest 20 percentile. This reflects the higher income concentration of married couple families. The top 20 percent also have on average 2.0 earners while the lowest earning households have 0.5 earners. It also shows the lower the household income, the higher concentration of individuals over 65 years and the fewer the number of children. The highest income households have on average three vehicles, compared to less than one for the lowest group. All of these characteristics contribute to the things consumers buy for their households in conjunction with their ability to pay.
Spending on Essentials
Essentials like food, shelter, utilities, gasoline, and healthcare eat up much of the income of lower income families, leaving less disposable income for non essentials. Yet, as stated earlier, when it comes to home furnishings and equipment, the disparity in percent of income spent between the ranges does not vary significantly. Table D shows how the percent of income being spent on most essential goods or services declines as the income brackets increase. As expected, shelter consumes the greatest portion of each income bracket – at 17.5 percent for the highest earners on up to 25.1 percent for the lowest.
While households with more money spend a smaller share of income on essentials, the amount of money spent is much greater. For those in the lowest 20 percent, an average expenditure of food is $3,651 at 15.1 percent of their earnings, while the highest 20 percent on average spends $12,646 – just 11.3 percent of income. For furniture and equipment, all levels of income still spend between 2.6 percent to 3.3 percent of their incomes.
Household Furnishings and Equipment
Among home furnishings and equipment, the percent of income spent on furniture and major appliances are the two largest segments. Aside from the lowest 20 percent quintile at 0.6 percent share, all income levels use between 0.8 and 0.9 percent of their income on furniture purchases (Table E). While the share is roughly the same, the dollars spent differ greatly. With an average annual expenditure of $1,054 on furniture, the highest income segment spends twice as much as the segment below it ($514) and almost four times the amount as the second 20 percent segment ($267). (Note: The Consumer Expenditure Survey conducted by the Bureau of Labor Statistics which is the basis of this article tends to reflect lower average annual expenditures compared to the Personal Consumption Expenditures tracked by the Bureau of Economic Analysis.)
Similar to furniture spending, the share of income spent on major appliances does not change much between income levels – ranging from 0.4 percent to 0.6 percent of income, regardless of earnings. Since a refrigerator or oven is more likely to be considered a necessity compared to a new sofa or table, average expenditures do not vary as much with highest earning households spending an average of $482 and the lowest spending $108 (Table F).
Despite the similarity in percent of expenditures spent on home furnishings and equipment among income segments, the vast differences in disposable income put much of the purchases within the top 20 percent of households. As shown in Table G, 65.6 percent of total furniture expenditures come from the top two income brackets with 44.1 percent from the highest 20 percent. Major appliances and home textiles are somewhat less concentrated in the highest 20 percent of households with the bottom three income levels accounting for 40 percent of their total expenditures. At 48.1 percent of total expenditures coming from the highest earning households, floor coverings are primarily being bought by households making more than $105,600.
Middle income families at one time were the bread and butter of the home furnishings industry. Median household income now stands at $55,775. This places the third quintile or 20 percent of consumer units earning between $38,000 and $63,800 purchasing only 17 percent of all furniture. Most of the home furnishings industry, 65.6 percent of furniture purchases belong to 40 percent of households earning over $63,800 annually.
In the next issue: Mapping age with the income.
November 16,
2017 by Jane Chero in Economic News, Industry
As Baby Boomers (ages 52 to 70 in 2016) are aging out of prime furniture buying years, Generation X households (ages 36 to 51) who are more affluent than ever have picked up the reigns with robust consumer spending – despite a much smaller population size. Couple the Gen Xers with the sheer population size of the Millennials (ages 35 and below in 2016) and the future for the furniture and home furnishings industry looks promising as more Millennial consumers age into adulthood and form households (Figure 1). It is estimated that in 2016, well over one third of Millennials had yet to form their own households, many still in college and others delaying household formation for various personal and financial reasons. The 2016 Consumer Expenditure Survey gives a snapshot of the five adult generations as shown in Figure 1 which also discusses the conflicting end year to be included as a Millennial. This article picks up from Statistically Speaking’s February 2015 article Age Shift Impacts Furniture.
Baby Boomers still have the highest number of households representing 34.8 percent of consumer units, compared to 27.5 percent for Generation X, and 22.9 percent for the up and coming Millennials. Though smaller in size than the Baby Boomers, Generation X continues to gain influence and make its mark in the U.S. economy alongside the fanfare of Millennials entering adulthood and peak buying years.
In 2016, U.S. Households spent $7.42 trillion in the U.S. economy with Baby Boomers controlling 37.2 percent of all total consumer expenditures and Generation X close behind at 32.8 percent. Millennials, with lower average household incomes and smaller numbers, control only 19.4 percent of the total (Table A). Regardless, with almost 10 million more consumer households, Baby Boomers still outspend Generation X – despite growing incomes for Gen Xers.
For Furniture and Bedding expenditures, Millennials are stepping up to spend more of their income on home furnishings than any other generation, but still control only 22.4 percent of industry sales. Generation Xers are closing in on Baby Boomers as the generation that controls more industry sales, 34 percent, compared to 34.7 percent for Boomers. As Baby Boomers age out of the furniture industry, the influence of Gen Xers and Millennials will continue to grow.
As shown in Table B, Generation X had an average household income (before taxes) of $95,168 last year, the highest mean household income of any generation in history. Gen Xers households earnings on average are 19 percent higher than Baby Boomer households and 45 percent more than Millennials. Of importance is that Generation X has the highest number of earners per households, 1.7 earners, compared to Millennials, 1.5 earners. As Millennials age and grow in the workforce, rising incomes paired with numbers of consumers will increase their 19.4 percent share of consumer spending dramatically.
With the highest incomes and an average age of 43.3, Generation Xers are prime consumers (Table C). At an average age of 60, many Baby Boomers have retired, while a majority of Millennials who have entered the workforce are gaining more purchasing power at an average age of 28. In fact Millennials have now surpassed Gen Xers in the number of individuals in the U.S. workforce.
Shown in Table D, Generation X represents the bulk of families with children. They have an average of 3.2 total people per household and 1.2 children under 18. Millennials, however, are starting to have children at a higher pace averaging 0.9 kids under 18 per household – bumping up the average size of a Millennial household to 2.6. Baby Boomers still have an average of 2.1 persons per households, most likely reflecting leftover Millennials still at home for younger Boomers.
As would be expected, only 33 percent of Millennial households are homeowners, but that number is increasing daily. Generation X has not quite embraced homeownership like their parents, with 62 percent owning their own residence compared to 76 percent of Baby Boomers (Table E).
As shown in Table F, ethnic diversity continues to grow the younger the generation. For heads of households, Hispanics or Latinos have become the second largest segment after Whites, Asian, and all other races – increasing from 9 percent of Baby Boomers to 18 percent of Generation X and Millennials in 2016.
The data continues to confirm that Millennials are the most educated generation. In 2016, 71 percent of Millennials were college educated versus 69 percent of Gen Xers and 63 percent of Baby Boomers (Table G).
Although Baby Boomers account for a greater percentage of consumers’ spending, Generation X consumers spent more per household with an annual average expenditure of $68,532 in comparison to the $61,204 of Baby Boomers (Table H).
Staying in line with overall expenditures, Generation X also spent more money per household on Furniture Expenditures in 2016. At an average annual furniture expenditure of $744, Generation X spends on average 24 percent more than Baby Boomers and 26 percent more than Millennials. (Note: The Consumer Expenditure Survey (CEX) projects total furniture industry expenditures at a lower rate than the Personal Consumer Expenditures (PCE) survey conducted by the Bureau of Economic Analysis, which is tied to the GDP. Mapping the CEX to the PCE reflects a more accurate picture of expenditures shown in Table I.)
Where Do Different Generations Spend Money?
Age and generation greatly affect what consumer items people buy and the share of a consumer’s total expenditures allotted for these items. Figure 2 illustrates a few major consumer items bought by each generation and which generation spends a higher percentage of their expenditures on those items.
As housing is a major expenditure for all consumers, Millennials are spending a higher percentage (22 percent) of their income on rent or mortgage payments. For rent alone, 37.6 percent of total spending comes from Millennials. For homeowners, Generation X spends the highest share of their expenditures on mortgage interest (6.6 percent). As they age, many Baby Boomers are paying off mortgages and simultaneously becoming by far the largest consumers of home maintenance, repairs and insurance. Last year 45 percent of these consumer expenditures were by Baby Boomers.
Millennials spend more of their income eating out than any other generation but due to population size, Gen Xers and Baby Boomers control almost 70 percent of the total dollars spent. In family-oriented Generation X, households on average spend far more than any other generation on entertainment – roughly 38 percent of total entertainment expenditures.
Cell phones, vehicles, and education are bigger ticket items for Millennials, while Gen Xers and families spend more of their incomes on apparel and shoes. Not surprisingly, Baby Boomers control much of the healthcare spending, averaging 9 percent of their consumer spending.
Perhaps the most important statistics for the furniture industry is that while Millennials currently control 22.4 percent of furniture industry sales, they also spend a higher percentage (0.9 percent) of income on furniture than any other generation. This should bode well for the industry as Millennials continue to flood into household formations. Couple this with the growing wealth of Gen Xers and the furniture industry has the demographic profile for growth in the future.