As financial optimism rises, here's how each U.S. generation is reacting

For Mia Montanye, a good-sized SUV is a necessity. She’s an occupational therapist making home-health calls in the Jacksonville, Fla., area. That means bringing lots of specialized equipment on each trip. She’s also a new mom, with a 10-month-old son who needs his own car seat.

Last year Montanye got by with a compact Toyota RAV4. Space was tight, but with all the economic disruptions related to the COVID-19 pandemic, she and her husband weren’t eager to take on a big new commitment. “It was sketchy for a while,” she recalls. “Everything was slowing down.”

Then, gradually, the outlook got better. Her husband got a promotion into management; she returned to part-time work after taking maternity leave. So in late December, the two of them snapped up a lightly used Volkswagen Tiguan, taking advantage of low-interest rates and zero-down financing. “I love it,” Montanye says.The new SUV is roomy; it’s a delight to drive, and with three rows of seats, it’s got extra space for whatever additional needs might arise in years to come.

Across the United States, financial confidence is rising -- and people are getting ready to turn that optimism into action. Clear evidence of these trends emerges from LinkedIn’s Workforce Confidence survey, which canvasses about 5,000 LinkedIn members every two weeks.

Last April, only 11% of respondents said they expected their earned income to rise over the next six months. That figure rose to 28% by mid-October -- perhaps aided by seasonal factors -- and it keeps on climbing. In the latest Workforce Confidence survey, completed Jan. 1, some 32% of respondents believe an earnings boost is coming their way by July.

Simultaneously, the percentage of respondents expecting a drop in earnings keeps shrinking. (It's down to 15% now.) Factor out the much larger share of respondents who don't expect any earned-income change, and this personal-finance metric has switched from pessimistic to optimistic by a double-digit margin.

As the chart above shows, optimism is especially intense among millennials (approximately ages 25 to 40), with 41% of them anticipating a pay boost in the next six months. That’s well ahead of the 31% showing for Gen Z (ages 24 and below) and the 30% for Gen X (ages 41 to 56). 

Baby Boomers (ages 57 to 74) are the most cautious, with just 28% expecting higher earnings over that same period.

How will this new extra income -- and this new sense of confidence -- be put to work? That’s a question with huge economic implications. Last year, Americans turned into a nation of hoarders. Government support programs kept personal income from collapsing, but a lot of traditional spending habits collapsed.

“Put it in the bank” became America’s fallback financial strategy. Data from the St. Louis Federal Reserve shows that overall U.S. bank deposits surged nearly 22% --a record $2.8 trillion increase. Amid lockdowns, business restrictions and the widespread advent of work-from-home, intense caution took hold.

One possibility is that last year’s short-term cash conservation turns into 2021’s longer-term investment strategy. In the latest edition of the Workforce Confidence survey, 36% of individuals said they expect to increase personal savings in the next six months. Millennials are most committed, at 45%; baby boomers are the most hesitant, at 33%.

Another option: full-strength spending comes back in style. That doesn’t seem imminent, but some intriguing flickers of activity are starting to register. Jay Schmitt, who runs Mazda and Chevrolet dealerships in Dayton, Ohio, says he saw “a lot of pent-up demand” for cars and trucks in 2020’s fourth quarter. “Our guests seem more confident in their purchases,” he adds.

Overall, 14% of Workforce Confidence respondents said they’re planning to step up spending in the next six months, up slightly from the 12% rate when the same question was posed in July. Millennials are the boldest generation, at 20%. Boomers lag all others, at 10%.

At Jacksonville’s Tom Bush Family of Dealerships, where occupational therapist Mia Montanye bought her SUV, e-commerce manager Brian Bush is betting that those numbers will inch up in the months to come.

 “I’m really optimistic for 2021,” Bush says. “People haven’t been spending money on vacations or having a good time. They’re able to make bigger down payments and get qualified for financing more often.” 

Other findings from the latest cluster of Workforce Confidence surveys are as follows:

Small-business employees are especially likely to feel stressed in industries such as media, communications, travel, legal, entertainment and health care. By contrast, their counterparts in energy and mining report lower stress levels. 

Female job seekers report lower confidence levels than their male peers. That gap, which narrowed in November and then widened around the holidays, probably is influenced by the higher share of women who’ve lost jobs recently. 

Cities where workforce confidence is rising include Dayton, Ohio, Milwaukee; Tucson, Ariz.; Nashville, Tenn.; Grand Rapids, Mich. and Louisville, Ky. 

Workers in human resources, recruiting, airlines, aviation and legal services reported higher confidence in their employers’ future in 2020’s final quarter, compared against their summer outlooks. Confidence declined, however, for restaurant employees.

Workforce Confidence Index methodology

LinkedIn’s Workforce Confidence Index is based on a quantitative online survey distributed to members via email every two weeks. Roughly 5,000 U.S.-based members respond each wave. Members are randomly sampled and must be opted into research to participate. Students, stay-at-home partners and retirees are excluded from analysis so we can get an accurate representation of those currently active in the workforce. We analyze data in aggregate and will always respect member privacy. Data is weighted by engagement level, to ensure fair representation of various activity levels on the platform. The results represent the world as seen through the lens of LinkedIn’s membership; variances between LinkedIn’s membership & overall market population are not accounted for.

Correction: (8/31/2021) Gen Z data in this article mistakenly included respondents who had chosen not to specify their age. This overcount may have skewed findings for Gen Z.

Neil Basu and Alexandra Gunther from LinkedIn Market Research contributed to this article.