Millennials in their 30s are sitting in an economic quagmire that could stick with them through retirement

• Millennials in their 30s are in a tough economic spot.
• They're struggling to get back to work and are accruing debt faster than other age groups.

Millennials in their 30s are living in a perfect storm of economic factors right now.

Pandemic-specific circumstances, such as the cost of childcare when schools closed, are still adversely affecting young parents. In the long run, millennials' retirement may also be affected if Social Security benefits are cut. Plus, they're accruing debt at the fastest rate since the 2008 financial crisis, according to a recent Wall Street Journal analysis of New York Fed data.

Below are some of the ways millennials are struggling in this economy.

Millennials in their 30s are accruing debt faster than their peers

While research from Experian and Credit Karma shows that Gen X has the highest average debt of any age group, millennials still hold a lot of debt too — and are accumulating it faster than anyone else.

According to The Journal's analysis, people who are 30 to 39 years old — currently the bulk of the millennial generation — have about $3.8 trillion in debt as of the fourth quarter of 2022, or about a $140 billion increase from the third quarter of 2022. As the Wall Street Journal article noted, that's 27% higher than in the fourth quarter of 2019, and the last time debt owed by 30-somethings grew this quickly was between 2005 and 2008.

A major part of that story is the way that student debt has hampered millennials' finances — more than a third of them report that their loans have kept them from buying a home, for instance, according to a survey from Legal & General.

As seen in the above chart, millennials are holding a lot more total debt than previous generations in that age group.

Millennials are missing credit card and auto loan payments

The debt burdens racked up by millennials are starting to stress their finances, and many have begun defaulting on those burdens.

Research published on the New York Fed's Liberty Street Economics blog showed that "millennials are missing credit card and auto loan payments at rising rates" as they take on more debt, as reported by Insider's Jacob Zinkula.

The data also underscores how inflation and the rising cost of living has hurt millennials in particular.

"We are seeing a 'credit gap' emerge in the sense that younger, less-affluent borrowers are coming under financial pressure from higher living costs and inflation outpacing their income gains," Silvio Tavares, chief executive of VantageScore, told The Journal. "We aren't seeing that among older and more-affluent borrowers."

Working millennials are still recovering from the pandemic

Millennials have also had trouble getting back to work.

Based on employment-population ratio data from the Bureau of Labor Statistics, the share of 35- to 44-year-olds with a job saw a severe drop during the pandemic. The ratio dropped from 81.2% in February 2020 to 71.8% in April 2020. The ratio in January 2023 of 81.0% falls short of that in the late '90s and early 2000s, when baby boomers were the same age. The highest ratio for this age group was in November 1999 as well as in January and February in 2000, when this ratio was 82.7%.

Millennials, who are in their prime parenting years, were affected by childcare issues during the pandemic and the childcare shortage. During the pandemic, some parents left the labor force as they handled issues like closed childcare centers.

Childcare issues aren't over though. The sector is still below its pre-pandemic level of employment and childcare costs can be expensive. According to a 2022 survey of mothers from Motherly, almost half of millennial or Gen Z unemployed respondents who ended up leaving the workforce in 2021 said they left because of childcare issues.

Additionally, more than half of families with young children — up to the age of five — saw their household income decline when childcare was unavailable, according to a study at The Century Foundation last year.

Millennials are still behind on homeownership

The fraught nature of homeownership for millennials is also a factor. They're the generation that waited the longest to own their first homes, contending with multiple recessions and being locked out of the housing market for years. Over the last few years, millennials have powered forward, however, propelling the pandemic-homebuying boom.

According to Census Bureau data, the homeownership rate among 35 to 44-year-olds was 62.2% in the fourth quarter of 2022. In 1999 when the youngest baby boomers fell in this age group, the homeownership rate was 67.0% in the first quarter of the year and 67.9% in the fourth quarter.

Millennials' determination to own homes has persisted, even as the market became impenetrable. It's only started to cool over the last few months.

According to a Bankrate survey, about 4 in 10 millennials who don't own a home said that's because homes are too expensive and 4 in 10 also said that they don't have sufficient income.

Millennials face looming retirement insecurity

If all of that wasn't enough, millennials' retirement situation in the future could be different from Gen X and baby boomers. The authors of a 2021 brief from the Center for Retirement Research at Boston College said that while millennials "are catching up in the labor market and they are getting married and buying houses," they are falling behind earlier generations in savings.

"One place Millennials have not caught up, however, is wealth accumulation," the authors added. "They are saving for retirement at the rate of earlier generations, but student debt is a constant drag on their balance sheet."

The below chart shows just how much wealth millennials hold compared to other generations as of the third quarter of 2022.

Additionally, millennials' retirement safety nets are likely to be affected if they can't get full Social Security benefits. A report from HealthView Services said that "If benefits are reduced by 20% (in accordance with the SSA's projections), an average 35-year-old Millennial earning $50,000 in 2022 will receive $13,500 less in annual Social Security income in the first year of retirement, and $365,000 less in lifetime benefits."

While a 35-year-old making that much in 2022 would see a lifetime benefit drop of about $365,000, the report showed that those earning six figures would see larger declines in lifetime benefits. Those that age making $100,000 would see a decline of about $563,000 and a decline of about $677,000 for a 35-year-old making $150,000.