CURATED READS ON GEN Z IN THE WORKPLACE

Welcome to the latest edition of Mind the Gap. We hope you find our perspectives useful. Let us know what you think at Alex_Panas@McKinsey.com and Axel_Karlsson@McKinsey.com.

—Alex and Axel

first up

As Gen Zers make their holiday purchases, one trend threatens to dampen the good cheer: “doom spending.”

Doom spending is when people buy goods and services as a way of coping with their pessimism about the economy, politics, or other issues, such as personal finances. Gen Zers and millennials are more likely than older consumers to doom spend, even though they are, on average, less wealthy than older generations. In McKinsey’s latest US consumer sentiment survey, a larger share of Gen Zers reported feeling pessimistic compared with the previous quarter and compared with baby boomers and Gen Xers, who were more optimistic than in the previous survey. Even so, Gen Zers also reported a greater willingness to splurge than older shoppers (though fewer Gen Zers said they plan to splurge over the next three months than in previous quarters). 

There are a few reasons why Gen Zers tend to report doom spending more often than other generations. Back in early 2023, we covered Zoomers’ “financial defeatism”—the idea that Gen Zers won’t reach financial milestones and therefore might resign themselves to spending instead of saving. Gen Zers may also make impulse purchases based on what they see on social media, where buying to your heart’s content is becoming increasingly frictionless. 
 
This doom-spending trend highlights another intriguing finding: consumer sentiment and intentions to spend don’t always align. Traditionally, when consumers report feeling optimistic about the economy, they also expect to spend more money on a variety of discretionary and nondiscretionary categories (while the opposite was typically true for pessimistic consumers). However, McKinsey senior partner Becca Coggins and coauthors find that while US consumers now tend to be more optimistic about the economy, they’re more cautious about their spending—at least, according to their survey responses.

When they do splurge, Gen Zers tend to indulge in categories such as dining out, apparel, beauty products, and jewelry. They also enjoy splurging on experiences (travel-related spending is big among Gen Zers).

The takeaway is that Gen Zers are willing to spend—and sometimes splurge—but only if they place real value on a purchase. That value may be largely based on the purchase’s cultural cachet, which Gen Zers can then project on social media.

To better understand what Gen Z consumers value in their purchases, consumer businesses can invest in their ability to capture a clearer and more predictive view of spending behavior using analytics and generative AI. If not, they’re likely to be bested by a competitor that has invested in these tools.

VISUALIZE IT

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WAIT, DON’T SCROLL

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NOT US; STILL GREAT

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Tie this on for size. It may surprise you to learn who’s leading the “tie renaissance.” [WSJ]

CROSSWORD

—Edited by Alexandra Mondalek, editor, New York