Increased renting
The financial crisis of 2008 shaped the attitude of the US consumers. Today, young consumers in the US do not want to make long-term financial commitments. Majorities of young consumers lost their jobs during the crisis. As a result, they do not see any sense in ownership. According to Caroline Fairchild, one can attribute these changes in consumers to “lower incomes and loan barriers, which have made renting a logical choice for most of today’s college graduates” (Fairchild 2).
A high rate of unemployment is the key indicator of recession. The recession of 2008 had the highest rate of unemployment and long-term consequences among consumers. The US Bureau of Labor Statistics noted that the rate of employment among young adults declined significantly.
This trend affected consumer consumption and attitudes (US Bureau of Labor Statistics 1). There was a mass layoff of employees, and the numbers were significantly higher than in the previous recessions. Generally, consumer spending declined in all major sectors, which declined from “$52,203 in 2007 to $48,109 in 2010” (US Bureau of Labor Statistics 1).
Such consumers feel insecure about their future. Young consumers, who are also college graduates and heavily in debts (student loans), are grappling with joblessness in the US (Martin 1). The Consumer Financial Protection Bureau notes that majorities are aged between 20 and 34 years old. They rent “cars, apartments, and even clothing to save money and stay flexible” (Fairchild 1).
Cliff Zukin, a professor at Rutgers University, New Jersey notes that every recession has its aftermath on consumers (Fairchild 1). For instance, the Great Depression changed attitudes of those consumers until the period of World War II. In the same manner, the financial crisis of 2008 has also affected consumers of today. Zukin observes that this generation does not want commitment (Fairchild 1).
House and car were once solid investments, but consumers of today consider such investments as financial burdens. He also notes that such consumers want commitments, which would allow them to adjust to any situation. David Blanchflower, an economics professor believes that renting is the best option for current consumers (Fairchild 1). He observes that such consumers lack adequate money for investment in their own homes because of low incomes.
Paco Underhill sees the role of technology in changing consumers’ attitudes and renting habits (Fairchild 1). Underhill says that renting was not common among the young generation during the Great Depression.
However, renting makes sense to generation of today. Today’s consumers believe that ownership is about having a product or service whenever the need arises. In other words, ownership is no longer about permanent possession. Technology has allowed modern consumers to gain access to products and services when need arises, and at reduced costs.
Threats to the retail sector
Economists believe that such changes in consumers’ attitudes are threats to retail sales. Most young consumers have switched to used items while others borrow from peers. Renting provides alternative to a long-term mortgage and its risks. Retailers observe that is a wrong trend for a post-recession economy.
Other factors like strict lending practices and high rates of down payment for long-term investments like cars and houses have led to changes in attitudes among current consumers. Overall, economists warn that people, who choose to rent rather than buy, give up a chance of creating wealth for the future. This suggests that financial stability of such consumers may not be possible in the future.
Works Cited
Fairchild, Caroline. Demographics: The Rental Generation Sees No Point in Buying. 2012. Web.
Martin, Andrew. A Generation Hobbled by the Soaring Cost of College. 2012.
US Bureau of Labor Statistics. The Recession of 2007–2009. 2012. Web.