The Saeculum Decoded
A Blog by Neil Howe
Mar 252012

Some generations come of age in inflationary eras, when midlife bond owners suffer but when young debtors can easily escape from the consequences of bad choices—since the real value of debt just seems to melt away under the impact of rising nominal wages. Boomers came of age in such an era. Other generations come of age in deflationary eras, when midlife bond owners are rewarded but when young debtors are relentlessly punished. Millennials are coming of age in such an era.

In this post, I’m going to publish one of our recent Social Intelligence articles, on “Why Young Adults Aren’t Buying Homes.” There’s a lot going into this mix, but pay special attention to the role debt is playing in slowing both this generation’s willingness to spend—and their ability to buy a home.

First-time home buying by young adults is way down, according to a new white paper by the New York Fed and an annual report by the Joint Center for Housing Studies of Harvard University. The Fed data show that only 9 percent of 29-to-34-year-olds got a first-time mortgage from 2009 to 2011, compared with 17 percent 10 years earlier. The Harvard study shows that the share of householders under age 35 owning their own home in 2010 was just 39.1 percent, the lowest since 1995.

This is bad news for a housing market that is still struggling to recover from the Great Recession. Even upper-end houses are affected, since without first-time buyers, lower-end owners will struggle to “buy up.” It is even worse news for Millennials and late-wave Gen Xers.  Homeownership rates for young adults dropped during the 1980s and reached post-war lows around 1990, but then made a gradual, if partial, recovery in the 1990s and early ‘00s thanks to declining interest rates.  Since the recession, however, homeownership rates for young adults have plunged back down to near-1990 lows despite record-low interest rates and very attractive prices for a new home. What’s going on?

The big-picture story, concludes a recent study by the Chicago Fed, is simple. First, young couples are not giving birth to children as young as they used to—and childbearing is strongly associated with home purchasing.  Yet this only partly explains the dearth of home buying because the homeownership rates of young couples with children have fallen sharply as well. The second long-term driver, argues the Chicago Fed study, is “heightened income risk”—which basically means the declining prospect of income growth among young households. That doesn’t sound good. And it isn’t.

Lately, much of this “heightened income risk” represents the greater likelihood of unemployment—which today is 14 percent for people age 25 and under versus 7 percent for people over age 25, according to the U.S. Bureau of Labor Statistics (BLS).  Also according to the BLS, less than 47 percent of 16-to-24-year-olds have had a job since 2007—the lowest rate since the BLS started keeping records in 1948. Even for young adults who do land jobs, their average wage is declining over the long term. According to recent research from the Economic Policy Institute, the average wage in 2011 for male college graduates ages 23-29 was $21.68 per hour—an 11 percent decline in inflation-adjusted dollars over the last 10 years. Wages for females in the same age and education group were down 8 percent during the same time period.  (For both men and women who went straight from high school into the workforce, the real declines according to EPI were similar.)

OK, now let’s imagine a 30ish couple for whom everything has gone right: They have college degrees, they’ve never been unemployed, and their wage growth has kept up with that of older Americans.  For them, there’s yet another hurdle: debt, specifically college loans.  According to another recent New York Fed study, total student loans outstanding are at an all-time high of $870 billion dollars—more than the total for credit cards ($693 billion) or auto loans ($730 billion). For someone in his or her 30s, the average college loan balance is now $28,500, and balances over $50,000 are common. Debt at this level stifles consumer spending and can render many young people ineligible for home mortgages, no matter how low the interest rate.

Note: the estimate of $870 billion in student loans made by the New York Fed a couple of weeks ago was superceded last Thursday by a report by the Consumer Financial Protection Bureau (a federal agency).  The CFPB’s new estimate is that total outstanding student loans passed $1 trillion late last year.

Young people who can’t buy a home are renting in larger numbers.  They are also moving in with their parents in larger numbers.  Increasingly, Boomer parents intervene to help their adult children buy their first home, either by cosigning the mortgage or by lending the money to them directly. Direct lending is not only good for Millennials, but also for Boomers parents who may enjoy getting a return of 4.0 percent on their assets rather than 0.4 percent on a low-risk CD. And as much as Boomers love their Millennial kids, they may also want their own space back—finally.

For anyone following the rising trend in multi-generational households (especially young adults living with their parents), take a look at this new Pew study.  Tabulating Census data, the study notes that whereas in 1980 only 11 percent of 25–35 year-olds were living with their parents or grandparents (a postwar low point), by 2011 that figure had doubled to 22 percent.  Millennials have now moved back to the way young adults lived before 1950 and the building of suburbia.  They’ve moved back to the “Frank Capra” household.

So what do most Americans think about the economic hardships facing today’s young adults?  While older generations usually resist any claim that young “have it harder” than they did, this time may be different. A recent Pew Research Center study found that a plurality of the public (41 percent) does indeed believe young adults are having the hardest time in today’s economy, and large majorities (70 to 80 percent) agree that it’s harder for today’s youth than it was for them to find a job, save for the future, pay for college, or buy a home.

Yet if older people may be worried about the economic future of today’s youth, Millennials themselves aren’t.  The Pew study also found that despite the difficult times they face, Millennials remain very optimistic about the future.  Nearly 90 percent of 18-to-34-year-olds polled in the study said that they either make enough money to lead the kind of life they want now, or expect to earn enough money in the future. Optimism is one of the most defining characteristics of Millennials, and in these tough times, it is arguably their best asset—that and their understanding and patient Boomer parents.

Mar 202012

I ended the last posting with a portentious remark about how a 4T is defined by a growing desire for order—and how Millennials will play a key role in securing that order.

With that in mind, take a look at the new recruiting campaign now being launched by the US Marine Corps.  The tag line: “Toward the Sound of Chaos.”  The new campaign is explicitly designed to be Millennial friendly.  Listen to these lines from their press release:

“Our survival, status and reputation as an elite force are dependent on our connection with the American people, and specifically with today’s youth–the millennial generation.”

“This campaign represents an opportunity to share who the Marines truly are–tough warriors, but also leaders in service and altruism–two of the core values of the millennial generation.”

Based on extensive recent research, the USMC “found that today’s millennial generation is more politically, culturally and socially diverse than previous generations. Historically, youth have viewed military service as a way to improve personally while serving the country. However, today’s youth want to be ‘part of something bigger,’ to help others in need.”

OK, enough preamble.  Now take a look at the top of their ad reel:

Go to this site to view the USMC’s whole new line of “episode” spots.  There’s definitely a new vibe here.  Millennial themes?  These soldiers don’t merely fight and win battles, they champion Good against Evil, wrest order out of chaos, and solve giant global problems.  These videos don’t show one-on-one gladiatorial combat (so popular in the famous Marine ads run for Gen-Xers in the 1990s).  Rather, they show vast teams working in unison.  Ties to past traditions (again, hidden in the ‘90s ads) are now celebrated.  Needless personal risks, once bragged about, are now shunned.  The warrior ethos is under a short leash; the democratic ethos–safeguarding the ordinary civilian–is now paramount.

I could go on and on here.  As some of you know, LifeCourse has consulted for just about every branch of the military since the late 1990s.  We were the ones who first advised the Marines to start co-marketing to parents… and developing a strong relationship with the recruits’ families.  We wrote a “Recruiting Millennials” handbook for the US Army in 2001, which was distributed to 6,000 recruiting officers.  Our doctrines have percolated through USAREC and TRADOC.  By now, I think that just about every recruiting, training, and retention specialist in any of the armed services is pretty much saturated in Millennial doctrine.

One nice result, dreamed up by McCann several years ago, was the wonderful parent-friendly Army slogan: “You made them strong, we’ll make them Army strong.”  More recently, the US Navy came up with a Millennial-friendly Bigger Cause slogan, which the Marines are in some way echoing: “America’s Navy.  A Global Force for Good.”

For decades, going back as far as the 1950s (with the Silent) and certainly since the birth of the all-volunteer armed forces in the early 1970s (the early attempts to connect with Boomers were disastrous!), the successes and failures of recruiting campaigns have revealed, year by year, something about the psychographic of whichever birth cohort is hitting their late teens/early 20s.

Mar 192012

This is called a preemptive posting.  If there’s ever a question I get asked a lot, it’s this: When did the Fourth Turning start?  So rather than wait for someone to ask again, let’s get right to it.

Readers of The Fourth Turning already know that 4Ts in history are dated and internally subdivided into stages by four critical events.  The first event, the catalyst, triggers or starts the 4T.  It is “a startling event (or sequence of events) that produces a sudden shift in mood.” The second, the regeneracy, marks the beginning of “a new counter-entropy that reunifies and re-energizes civic life.” The third, the climax, is “a crucial moment that confirms the death of the old order and triumph of the new.”  The fourth is the resolution, “a triumphant or tragic conclusion that separates winners from losers, resolves the big public questions, and establishes the new order.”

So to ask when the current 4T began is to ask, when was the catalyst?

Pending stunning new developments, I believe the catalyst occurred in 2008.  It’s a date that is looking better and better as time goes by.  The year 2008 marked the onset of the most serious U.S. economic crisis since the Great Depression.  It also marked the election of Barack Obama, which could yet turn out to be a pivotal realignment date in U.S. political history.

Let’s look at each of these separately.  First, the economy.  Yes, the U.S. recession technically started in December of 2007, but neither the public nor the market felt it until the spring and summer of the following year.  In fact, if I had to give the catalyst a month, I would say September of 2008.  The global Dow was in free fall.  Banks were failing.  Money markets froze shut.  Business owners held their breath.  Thankfully, America’s leaders succeeded in avoiding a depression by means of a massive liquidity infusion and fiscal stimulus policies whose multi-trillion-dollar magnitude has literally no precedent in history.  Today, for the time being, the U.S. economy seems safe again, though to be sure it has emerged weaker and more fragile—and certainly more leveraged—than it was before.

Yet at the time, behind closed doors, many of America’s top leaders believed that they were skirting the edge of a catastrophe that could have exceeded 1932 in its destructive potential.  And they were probably right.  Treasury Secretary Hank Paulson later recounted (in On the Brink) that in the last two weeks of September, 2008, they were only “days away” from “economic collapse, another Great Depression, and 25 percent unemployment.”  At one Thursday-evening meeting, Fed Chairman Ben Bernanke famously urged legislators to “break the glass” and pass a bailout package with the simple admonition: “If we don’t do this, we may not have an economy on Monday.”

And, to add even greater edge to this catalyst, we were at that time just six weeks away from the election of Barack Obama, who brought a new party to power and was America’s first African-American President.  Would he have won without the meltdown?  Who knows.  It would have been a much closer election.  Yet as time goes by, we may see something more important in the 2008 election—how it may mark the beginning of a new political realignment.  Admittedly, it’s still too early to say.  Obama’s approval ratings are still relatively low, and the GOP—though showing deep fissures and light turnouts in this year’s primaries—may still experience a resurgence.  This is a call that will be much easier to make a year or two from now.

People have asked me how confident I am about 2008.  All I can say is, the catalyst has to be sometime around 2008 given the generational dividing lines.  As a rule, a new turning starts a few years (typically 2 to 6) after each living generation (especially the new youth generation) enters a new phase of life.  2008 was 4 to 6 years after the oldest Millennials reached age 21 and graduated from college—and 3 years after the oldest Boomers (born in 1943) started to receive their first Social Security retirement checks.  In terms of phase of life, this is right on.

On the other hand, 2001 was too early—and Bill and I repeatedly explained this to many readers who once told us that 9/11 “must be” the catalyst.  We agreed that the mood shift was sudden and dramatic.  But we pointed out that it the living generations were simply too young: The oldest Millennials, for example, were barely college sophomores.  As time passed—and as the Greenspan bubble welled up under the U.S. economy and as public disillusionment set in over the U.S. invasion of Iraq—our initial doubt was justified.  9/11 will go down as one of the more famous crisis precursors in American history.  A crisis precursor is an event that foreshadows a crisis without being an integral part of it.  Other such precursors in American history include the Stamp Act Rebellion (1765), or Bleeding Kansas (1856), or perhaps the Red Scare (1919).  Incidentally, the media did several retrospectives on the 1919-20 bombings in the wake of 9/11—since they represented, prior to 9/11, the most destructive act of political terrorism by foreigners ever attempted on U.S. soil.

OK.  Now let’s move on to the next question: Where is the regeneracy?

I think it’s pretty obvious that the regeneracy has not yet started.  So how long do we need to wait for it?  And how will we know when it starts?  Those are good questions.  I recently went back over The Fourth Turning to recall how we dated the stages of the each of the historical 4Ts.  And I found that we were very explicit about dating the other three stages (catalyst, climax, and resolution) for each 4T.  But we were always a bit vague about dating the regeneracy, treating it more like an era than a date.  There is a reason for this.  We may like to imagine that there is a definable day and hour when America, faced by growing danger and adversity, explicitly decides to patch over its differences, band together, and build something new.  But maybe what really happens is that everyone feels so numb that they let somebody in charge just go ahead and do whatever he’s got to do.  I’m thinking of how America felt during the bleak years of FDR’s first term, or during Lincoln’s assumption of vast war powers after his repeated initial defeats on the battlefield.

The regeneracy cannot always be identified with a single news event.  But it does have to mark the beginning of a growth in centralized authority and decisive leadership at a time of great peril and urgency.  Typically, the catalyst itself doesn’t lead directly to a regeneracy.  There has to be a second or third blow, something that seems a lot more perilous than just the election of third-party candidate (Civil War catalyst) or a very bad month in the stock market (Great Power catalyst).

We are still due for such a moment.  We have not yet reached our regeneracy.  When it happens, I strongly suspect it will be in response to an adverse financial event.  It may also happen in response to a geopolitical event.  It may well happen over the next year or two.  Given the pattern of historical 4Ts, it is very likely happen before the end of the next presidential term (2016).  Which means we already know who will be President at that time: Either Obama or Romney.  (Or at least this is high probability: According to Intrade, it is now over a 96 percent bet, so if you disagree you can make 25-to-1 by betting against global future traders.)  It’s interesting that both men are temperamentally similar—cool, detatched, capable of gravitas–and that one could imagine either playing a Gray Champion role if history required it.  It’s also worth noting that Romney is the only GOP candidate who could steal a sizable share of the Millennial vote that would otherwise go to Obama.  (Romney has consistently done better in the GOP primaries with voters under 30; Santorum and Gingrich with voters over 50.)

Next question: When will the 4T climax take place?  To be honest, I have no idea.  On timing, let me toss out my guess based on the typical pattern of historical 4Ts: The climax may arrive around 2022-2025.

And when will the resolution occur and the entire 4T come to a close?  Again, there is no way to know.  If the 4T turns out to be of average length, I would say 2026-29.  At that time, an entire saeculum will draw to a close.  And the first turning of a new saeculum will commence.

Let me add one more thought.  Bill and I once explained the dynamic of seasonal turnings by applying a four-fold typology of social states invented by Talcott Parsons.  It seemed to work pretty well.  Parsons said that each state was defined by the demand and supply for social order, each of which could be high or low.  So here are how the four turnings may be defined:

Demand for Order        Supply of Order

1T     High                            High

2T     Low                             High

3T     Low                             Low

4T     High                            Low

The point here being that 4Ts are pretty chaotic.  During 4Ts, the future seems much less certain than in retrospect.  They are mostly defined not so much by how much institutions provide order, but by how much people want order.  Here’s where the Millennials will play a key role.

Mar 182012

Let’s push reset and try it again.

At the end of 2010, I let this blog lapse.  I felt pressured by time: Our business (LifeCourse Associates) was developing new products and services, I was on the road a fair amount, and I felt I just didn’t have enough hours in the day to keep it up.  In retrospect, I regret letting it go.  I really miss commenting and yes sometimes venting on the day’s news, answering questions about our books, and especially feeling the curiosity and energy from the blog readers’ comments.  So I’m back.

OK, enough about the past.

Some will notice that the new incarnation of this blog has a new look.  And why not?  We’re trying to be creative.  As for the word “saeculum,” former readers already know what that’s about.  New readers will find out soon enough.

Former readers may also be interested in a couple of new developments at LifeCourse that will (positively) influence this blog.  One is a new information service on social, attitudinal, and demographic trends that we have started for major clients.  It’s called “Social Intelligence,” and it will be generating lots of content that I will sometimes be excerpting on this blog.  Another is a new and fairly sizable commitment we are now making to helping employers look at “generations in the workplace.”  We now run our own surveys on this subject.  So here again we should be able to supply the blog with plenty of material.  (If you want to know more detail about these new initiatives, just look further at our website here, here, and here.)

Note: I’ll get an RSS feed button up in a few days.

I can’t wait to get started.