There's reason advertisers are willing to pay big bucks to have their ads reach a young adult audience. People younger than 55 spend more money than 'old folks,' and that has John Lonski, chief economist of Moody's Capital Markets Research Group, concerned.
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Old timers' role as a primary driver of job growth curbs both spending and inflation, Lonski noted in a report this week.
It's been bad enough that employment income has been growing by 3.5% year-over-year recently, which is well under its 5.5% average annual increase during the four-years-ended June 2007.
"Worse yet," Lonski wrote, "the fact that employment growth has been skewed toward workers aged 55 years and older suggests that a disproportionate share of the U.S. subpar expansion of income has been directed toward Americans having a lower propensity to spend and a stronger inclination to seek out bargains."
During the three-months-ended July 2012, a record 21.3% of U.S. employment consisted of workers aged at least 55 years of age.
"As this ratio continues to set new record highs going forward, both household expenditures and price inflation are likely to remain subdued," Lonski wrote. "Arguably, older populations slow down the velocity of money, which implies that each additional dollar of the money supply tends to be associated with a smaller increase by total spending than otherwise."
"When the youngest segment of the U.S. workforce, or those aged 16 to 24 years, peaked at a record high 23% of employment, the year-over-year growth rates were 6.7% for the annual rate of core PCE price index inflation and 4.7% for real consumer spending," Lonski wrote. "Now that the oldest segment, or those aged 55 years and up, has set a record high relative to total employment, the annual rates of growth have slumped to 1.8% for the core PCE price index and 1.9% for real consumer spending."
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