The one-time “Oracle of Wall Street” who famously called the 2008 financial crisis is once again sounding the alarm—this time warning that Gen Z and millennials will be “very weak” in the year ahead. Meredith Whitney, the prominent financial analyst whose prescient warnings about subprime mortgages proved true nearly two decades ago, has shifted her focus to the economic vulnerabilities facing today’s younger generations in the evolving U.S. economy.
On a recent episode of “Barron’s Roundtable” aired by Fox Business, Whitney explained that while Gen Z and millennials have propped up consumer spending and have often been considered the backbone of the post-pandemic economy, their financial underpinnings are increasingly fragile. Whitney described Gen Z and millennials—she said she calls them the “avocado toast consumer”—as being uniquely exposed due to a convergence of economic factors that threaten their resilience: rising costs, stagnant wages, unaffordable housing, and a waning safety net from pandemic-era benefits.
She added that she was “not surprised” by the recent disappointing jobs growth in August, attributing it to a hidden, weaker economy underlying the surface, with the avocado toast consumer at the heart of things.
Looking closely at consumption
Whitney points to decelerating and even negative consumer spending in key categories that comprise approximately 20% of the workforce, including hotel, hospitality, and retail sectors, as a primary indicator. She also suggests that current immigration policies are further pressuring these same categories by effectively removing a million non-native-born workers from the workforce. This combination, she believes, indicates a more fragile economic environment than widely perceived, and she anticipates the unemployment rate could climb into the “high fours” by the end of this year and into the next. By this, she meant unemployment of 4% and above, even approaching the 5% range. These are low by historical standards, but elevated from the 3% range from 2022 that was the lowest since the 1970s.
Her analysis dives deep into the U.S. consumer, a segment she finds “so granular.” Whitney has segmented consumers over the past five years, identifying a stark contrast between the “high-end consumer” and what she terms the “avocado toast consumer”. The latter group, primarily college-educated, high-spending individuals between 24 and 38 who often do not own homes but possess significant discretionary income, has been a key driver of the economy. This demographic stands in contrast to over 52% of households that have been “struggling.”
However, this affluent, younger cohort is now facing significant financial headwinds, she argued, largely due to the resumption of student-loan repayments and the impending roll-off of healthcare subsidies. Whitney explained that for nearly five years, there were no penalties for not paying student loans, creating a false sense of financial freedom. While a one-year “on-ramp” period without penalties beyond incurring interest was in place, repayments officially resumed in October 2024. Although many began paying, a substantial portion did not, with 25% of student loan holders and over 50% of the total student loan debt concentrated within the 24-38 age group.
For those who have resumed payments, the impact has already been felt, leading to suppressed spending evident in the poor performance of quick-service restaurants like Panera, Cava, and Sweetgreen. Whitney warns that the situation is poised to worsen, with impending wage garnishment for seriously delinquent student-loan debt set to further squeeze this cohort. Sweetgreen, to her point, cut its outlook for the last two quarters as same-store sales have fallen into a prolonged slump, with CEO Jonathan Neman shaking up the menu to lean into protein as he tries to give customers more bang for their “sad desk salad” buck.
More subsidies expiring
Adding to this pressure is the expiration of key healthcare subsidies at the end of the year. In response to COVID-19, the American Rescue Plan Act had subsidized healthcare premiums for individuals earning up to 400% over the poverty line, effectively providing an additional $300 a month in discretionary income for many. This benefit, combined with the pause on student loan payments, amounted to a “massive amount of discretionary spend” that will now disappear.
Whitney emphasizes that the cumulative effect of wage garnishment on student debt and the cessation of healthcare subsidies will create a “completely different type of headwind” next year, particularly for Gen Z and millennials. Companies have heavily focused their marketing efforts on these younger generations, who will now experience “real pressure on consumer spend.” Consequently, Whitney predicts that “Gen Z and Millennials will be very weak over the next year”.
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.