'Silver economy'—America’s secret weapon against recession
As the U.S. economy braces for a seemingly imminent recession, economists are hopeful that America’s elders will keep the economic engine humming along.
According to the Census Bureau, roughly 18% of the U.S. population is 65 or older. This demographic has made a fortune from real estate, has its financial affairs in order, and is flush with cash.
Besides, senior citizens are less exposed to the labor market and don’t face the same debt levels as younger generations.
These realities allow seniors to punch above their weight in terms of economic output. According to the Department of Labor, Americans 65 and older accounted for 22% of spending in 2022—the highest share since record-keeping began in the 1970s and a substantial jump from 15% in 2010.
“These are the consumers that will matter over the coming year,” Susan Sterne, chief economist at Economic Analysis Associates, told the Wall Street Journal. “Our large share of older consumers provides a consumption base in times like today when job growth slows, interest rates rise, and student-debt loan repayments begin again.”
A rising tide lifts all boats
Seniors are part of the “silver economy”—a term coined by the EU to describe the economic contributions of people aged 50 and older. Globally, there are roughly 750 million seniors, and this figure is expected to cross 1 billion by 2030.
The U.S. is home to more than 56 million seniors who spend big on travel and recreation, transportation, healthcare, and housing.
“Seniors are now significant players in the economy, and their role will get even bigger in the 2020s,” said economist Wolfgang Fengler. Over the next decade, “seniors will remain the wealthiest age group,” pumping trillions into the economy every year.
While millions of Americans have already depleted excess savings accumulated during the pandemic, seniors have amassed a staggering $77 trillion (yes, trillion) in wealth, according to the Fed.
That wealth could be the tide that lifts all boats if the economy enters a downtrend because of higher interest rates and declining consumer spending among younger demographics.
How likely is a recession?
The U.S. economy has been surprisingly resilient this year, but that’s likely to change heading into 2024 as persistently high interest rates dampen business investment and consumer spending, according to economists surveyed by the Financial Times.
Economists have “genuinely become more downbeat about prospects in 2024,” according to Simon MacAdam, a senior economist with Capital Economics, a London-based research firm.
One of them is Nathan Sheets, chief economist at Citi. “There will be a recession; it’s just going to come later,” he said, referring to the U.S. and other countries.
According to a survey by Wolters Kluwer Blue Chip Economic Indicators, economists have placed a 48% likelihood of a recession in the next 12 months.