You can thank the baby boomers for the stunning strength of the US economy

• You can thank baby boomers for the strong US economy, according to market veteran Ed Yardeni.
• Boomers are by far the richest generation, and they're spending more money as they retire in droves.
• "Seniors are traveling more, dining out more, and visiting their health care providers more," Yardeni said. 

The US economy has baby boomers to thank for its strength and resilience even as some worry about a potential recession.

According to market veteran Ed Yardeni, the baby boomer generation is powering spending in key areas of the economy that have seen massive job gains in recent years.

"Thanks to all the retired and retiring seniors, spending on air transportation, hotels & motels, food, and health care services all have been soaring to new or near record highs. That's because seniors are traveling more, dining out more, and visiting their health care providers more. As a result, payroll employment in all these industries continues to rise to record highs," Yardeni said in a note on Monday.

There are now 47.7 million baby boomers who are not in the labor force, and that number grows by the day as more baby boomers hit their retirement age. 

"That's a lot of seniors who are no longer working. Presumably, most of them are retired and are no longer saving but rather spending their retirement savings and/or the income it generates," Yardeni said. 

And the baby boomer population has a lot of money to spend, especially as the stock market trades near record highs.

Baby boomers hold a record $76.2 trillion in wealth, or about half the total US household net worth of $156.2 trillion. And as more boomers retire from their jobs, they're gearing up to spend most of that money.

"This helps to explain the resilience of the economy and why there hasn't been a consumer-led recession over the past two years, as was widely feared," Yardeni said.

Instead of getting a recession, the US economy is leaning into trend-level growth of just over 2%, with the Federal Reserve's GDPNow forecast suggesting first quarter GDP growth of 2.5%.

And that economic strength could last for years if baby boomers continue to spend their money, as it's just one more tailwind in combination with falling inflation and the potential for interest rate cuts from the Federal Reserve.

"The Baby Boomers watched a lot of Star Trek during the 1960s. They certainly took to heart Spock's mantra 'Live long and prosper.' He should have finished the thought with 'Then retire and spend it all before your expiration date," Yardeni added.

This article was originally published in April 2024.