Younger Americans are becoming a surprising stabilizing force in the US consumer economy, even as tariffs, rising prices, and AI-driven challenges reshape corporate expectations. New commentary from retail and consumer-goods executives suggests Gen Z and Millennials are powering areas of growth that many feared would pause under economic headwinds.
The continued willingness to spend — particularly on discretionary categories like apparel, accessories, and personal care — stands in stark contrast to cooling trends in older and lower-income households. The dynamic is unfolding as labor-market data shows hiring softening but not collapsing, leaving younger workers with steadier paychecks and more predictable spending habits than anticipated heading into year-end.
Younger Shoppers Step In Where Traditional Demand Slows
At the Reuters NEXT conference, executives from several consumer-facing brands emphasized that shoppers under 40 are driving growth across categories, from eyewear to handbags. Warby Parker said it expects to close 2025 with stronger profitability than initially forecast, citing consistently high engagement from younger customers who continue to prioritize vision care and accessible luxury.
Coach parent Tapestry echoed the trend, noting that spending strength is broad-based but particularly firm among millennials and Gen Z in both the US and China. The company highlighted that younger consumers are delaying big-ticket commitments such as homebuying but still spending on items that feel attainable and mood-boosting — including accessories, giftables, and entry-level luxury. This shift reflects what some economists call a “psychological recession”: consumers feel stretched, but younger households appear more adaptable and selective rather than pulling back wholesale.
Tariffs Raise Costs, but Companies Adjust Rather Than Retreat
The Trump administration’s tariff regime continues to complicate cost structures across consumer goods. Still, companies say they are working aggressively to prevent those pressures from reaching younger shoppers.
The Honest Company described a dedicated internal group — its “tariff tacklers” — tasked with absorbing or offsetting tariff-related cost increases without resorting to extreme price hikes. The strategy combines supply-chain adjustments, cost engineering, and AI-based forecasting to maintain margins while keeping prices stable for core demographics that are highly price sensitive. Other brands across the personal-care and apparel sectors report similar efforts, noting that passing through costs without damaging brand loyalty is a delicate balancing act in the current market.
AI Boosts Efficiency While Consumer Behavior Remains the Anchor
Artificial intelligence continues to drive productivity gains for retailers and brands, especially through smarter inventory management, demand prediction, and marketing optimization. Executives say these improvements are expanding margins even as external pressures — tariffs, freight rates, and fluctuating labor costs — challenge budgets.
But despite the efficiencies AI provides, consumer behavior remains the central variable. With hiring cooling and wage growth normalizing, economists are watching closely to see whether younger shoppers can maintain their current pace of discretionary spending into early 2026. Early signals, including resilient holiday shopping interest and stable service-sector employment, suggest they may continue to outperform expectations.
Looking Ahead
The next major test will come from the delayed government reports on inflation and consumer spending, which will shape both Federal Reserve decisions and retail strategies heading into the new year. If job stability remains intact, analysts believe younger consumers could continue to drive selective growth despite macroeconomic uncertainty.
However, brands are cautious: if tariffs rise further or the labor market weakens meaningfully, the most price-sensitive young shoppers could pivot quickly. For now, though, they remain one of the most reliable engines powering the consumer economy.
