Why Younger Americans Are More Optimistic About the Economy

The new PYMNTS Consumer Expectations Index (PCEI) from PYMNTS Intelligence looks at how people are feeling about the economy. It’s not just a measure of their optimism but also of whether they have the financial freedom and security to act on their sentiments.

As of February, the average American scores the economy at 56.5. Since 50 is neutral on a scale of 0 to 100, that’s positive, but only slightly. That number hasn’t changed by more than a couple points since last October. The real divide shows up when you break down the data by generation.

 

Younger Americans are generally more upbeat about their economic prospects. Millennials feel the best about the economy, scoring 60.7, followed by bridge millennials (millennial/Gen X cuspers), at 57. Gen Zers score slightly below average at 56.2, but even they are more optimistic than Gen Xers or baby boomers and seniors.

Part of the reason may be simple math.

“The younger generations do have a significant amount of work life available, which means increasing wages will eventually compensate for recent inflation within their work life,” Tom Arnold, Ph.D., a professor of finance at the Robins School of Business at the University of Richmond, told PYMNTS.

“With these generations, as long as jobs are available and there is a reasonable amount of upward mobility, they will be the most optimistic about the future, because there is a lot of future left for them.”

But there may also be another explanation: Younger Americans are simply more used to leaner times. Most of them weren’t in the workforce yet during the ’90s boom.

Younger consumers “have less of a reference point,” explained economist Scott Beaulier, Ph.D., a professor of economics at the University of Wyoming, in an interview with PYMNTS. “Someone born in 2003, for example, has experienced no high school graduation thanks to COVID, high inflation post-COVID and now poor job prospects. Compared to the elderly, there is less of a known and lived alternative.”

Meanwhile, older Americans are less impressed with today’s economy. Baby boomers and seniors are feeling the worst, with a PCEI score of 53.5, while Gen Xers aren’t doing much better at 55.2.

“Older Americans compare today’s economy to the conditions they experienced during their peak earning years, so rising costs or uncertainty feel like a step backward,” Beaulier said.

Break the PCEI down into its parts, and a clearer picture emerges. Baby boomers and seniors feel basically OK about their personal financial resilience (scoring 59.3), only slightly below average (60.1), while Gen Xers feel the worst of all generations about their own situation (56.7). Zooming out, boomers/seniors and Gen Xers feel pretty gloomy about the macroeconomic and buying climate right now (45.2 and 46.1, respectively, versus the average 48.9).

Still, it’s not all doom and gloom for older Americans. They actually feel better than younger generations about labor market security (69.9 for baby boomers/seniors, 69.1 for Gen X, 67.6 on average). Evidently, baby boomers, many of whom are comfortably retired, are deriving their pessimism more from their broader outlook on the economy than from their  bank and 401(k) statements.

As Arnold points out, older generations have lived through “inflation in the 1970s, the 1987 crash [and] the dot-com crash,” and they’ve seen how even economic recoveries do not improve the situation for everyone. These generations “know that after a period of inflation, price levels do not recede, and they will not have the benefit of wages eventually rising to compensate, like the younger working generations.” The upshot, Arnold said: “Their past experiences make them justifiably more cynical.”

So What’s Actually Going On?

On the whole, the economy looks a bit worse than it did last year, but it’s not so bad, according to the U.S. Census Bureau Index of Economic Activity (IDEA). The index looks at 15  economic indicators, factoring in a wide range of information including housing, international trade, retail trade and more. By this measure, we’re at -0.39 (as of March 5), which is worse than March 2025, when it stood at 0.53, but much better than periods of real economic slowdown. In April 2020, for instance, the index plunged to -7.51.

Of course, many of those indicators don’t show up directly in people’s day-to-day lives. So, let’s see how individuals are really doing when we remove sentiment from the equation. For starters, inflation isn’t especially high right now. In January, the most recent month on record, prices were up 2.4% year over year and 0.2% month over month, per the U.S. Bureau of Labor Statistics (BLS).

Then there’s personal income. According to the BEA, personal income rose 0.3% from November to December 2025 (the latest figures available), while spending was up 0.4%. Spending increased the most in housing and utilities, though, and healthcare spending also saw a jump. In other words, much of that extra spending is going toward basic necessities.

Then there’s employment. BLS data shows there are fewer job openings each month, while the number of hires hasn’t changed much. In January, the unemployment rate (4.3%) was slightly lower than the month before (4.4%), but it was up significantly from one year earlier (4.0%).

Pay rates tell a different story. People entered 2025 with fatter wallets. Wages increased more than inflation over the course of the year, rising 3.9% from $1,159 in 2024 to $1,204 in 2025. Many people may not feel that pay bump, though, since they have to use the money to pay off their rising debt. Federal Reserve data shows that outstanding consumer credit rose 3.3% in 2025 to $5.1 trillion. Basically, cooling inflation and rising wages offer some relief, but higher unemployment and growing debt are still weighing on many households.

At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.