Chicago Trib

The confidence of youth: They're buying and buying

By Robert Manor Tribune staff reporter Published August 12, 2001

They are the spenders of last resort, the people who buy the most--and the most relentlessly. Meet the last, best hope for the nation's hobbled economy: men and women under 35.

Carlos Huntley is buying a big, pricey condo in downtown Chicago. Brett Bombicino, an Internet retailer, bought two sport-utility vehicles as presents for his birthday. Monique Fortune, an unemployed executive, is planning a wedding trip to Hawaii.

Despite rising unemployment, a tepid stock market and an economy that looks to be headed for the rocks, these three, and young people like them, continue to snap up homes, cars, vacations and other goods and services. Their confidence about the future is one of the few positive features in the nation's economy.

And their spending continues despite a blizzard of dismal economic news, including a report from the Federal Reserve last week that painted the most pessimistic picture yet, warning that manufacturing and agriculture continue to deteriorate as other sectors struggle to hold their own.

Despite all evidence to the contrary, these young consumers "remain relatively confident about their future," said Lyn Franco, director of consumer research at the Conference Board, which surveys consumer confidence.

The Conference Board's statistics attest to the positive outlook of the young buyer. In November, when the economic slowdown began in earnest, the consumer confidence index was higher for people between 35 and 54 and people over 55 than it was for younger consumers. By January, the under-35 index had eclipsed both older brackets, and it has stayed higher since.

Probably the most important single factor in the young consumer's confidence, economists say, is psychology. People younger than 35 tend to have only dim or second-hand knowledge of truly hard economic times. Moreover, experts say, wealthier and older people have been hit harder by the stock market's malaise, and many of Corporate America's cutbacks have been aimed at older workers.

"The biggest deterioration in confidence has come among the oldest and wealthiest households," said Diane Swonk, chief economist for Bank One Corp. Young people, by contrast, are setting up households, having children, and generally enjoying the rewards of a rising income, she says.

A look at three young consumers reveals a lot about the mind-set of the people propping up today's economy--and gives some reason for optimism. None of these young people has any plans to start cutting back now.

The entrepreneur

Brett Bombicino, 32, sells natural health products over the Internet from a third-floor loft in the West Loop. In an earlier business incarnation, he used the loft as a base to sell T-shirts, caps and other clothing.

His choice of businesses says something about his attitude toward risk. The apparel business is a savage one, in which new companies die off en masse. And the landscape is littered with remains of would-be Net retailers who ran out of money.

But Bombicino isn't worried.

"I bought a Range Rover and a Jeep Wrangler," he said, as presents for himself. Bombicino says he isn't cutting back on his lifestyle to save money in case his business sours. Nor is he more cautious in the financial decisions he makes now compared with early last year, when the Internet appeared to be the future of retail.

He said his business, B&B Distribution, is growing and will gross a million dollars or more this year delivering herbal or natural products, among them remedies to promote the male libido, restore hair and protect the prostate. Bombicino said he would like to add more products to his Web sites because even financially troubled customers are willing to spend money on their health.

Bombicino did say that his business will suffer if the economy deteriorates rapidly. He does not think that will happen.

"If I look at the big picture, I don't think the economy is going to get worse," he said.

Swonk said younger consumers see the economy's future as acceptable because that has been their experience throughout their adult lives. "Their perspective of the world has been shaped by that," she said. "It comes after the best labor situation in the last 30 years."

Confidence is not the same as foolishness. Bombicino said he started B&B on a shoestring, and so he isn't loaded with debt.

And in any case, he said, there is no alternative to risk.

"I could have worked for a big corporation the last 10 years--and been laid off in an instant," he said.

The manager

Monique Fortune lives in a Lakeview condo, drives a Lexus, vacations in Spain. And a few weeks ago, she joined the ranks of the unemployed.

"No I haven't cut back" my spending, Fortune said.

Fortune, 33, was on a fast-track career in accounting, telecommunications and marketing when the company she worked for abruptly closed its offices here. Now she is applying for unemployment benefits for the first time in her life, while planning a honeymoon in Hawaii.

And no, Fortune is neither reckless nor foolish.

She bought the Lexus used. Her condo is a one-bedroom. She has an MBA from the University of Chicago and she is a certified public accountant. Her resume lists repeated promotions to jobs with greater responsibilities. She is getting calls from recruiters.

And she planned ahead.

"I am not in debt other than my mortgage and my car payment,' Fortune said. "I have no credit card debt. I have no children."

She does, however, have savings, enough to last a year. Her fiance, whom she plans to marry in November, has a good job.

So confident is Fortune that she is a bit picky as to the kinds of jobs she will take.

"I am being aggressive in what I expect, what I desire," she said. "I am not looking for 80-hour weeks." She wouldn't relocate, unless the job were particularly attractive. She doesn't want to travel too often.

Swonk said people in Fortune's position developed their confidence about the future because their careers have enjoyed success, and they anticipate the same ahead.

"These people have seen real income gains," Swonk said. "In many cases that is a cushion for them."

"I am confident," Fortune said. "Maybe that is because I have only been unemployed two weeks."

The homebuyer

Carlos Huntley and Jennifer Wasielewski are buying a 3,000-square-foot condominium in the downtown area. Both work in the computer industry, where layoffs are epidemic.

The building offers condos in the $350,000 to $460,000 range.

Huntley, 26, said it is a stretch to cover the mortgage.

"We have been willing to give up things," he said. "We wanted to get a new car. That is not going to happen. We haven't gone on vacation. Entertainment has to give."

Buying a home is one of the supreme expressions of consumer confidence. The buyer believes he will have a job to pay the mortgage, and is willing to bet that housing prices will rise rather than fall.

Although they have cooled a bit in recent months, home sales continue to be strong. Their benefit to the economy is multiple--creating jobs for construction workers, profits for developers, and sales of furniture, appliances and other goods.

Huntley was in high school during the last recession, and it made an impression on him.

"I was raised by my mother," he said. "She lost her job." It was a tense two months before she found new work, he said.

But Huntley said risk is inevitable. "At some point," he said, "you just have to make the leap."

-- Anonymous, August 12, 2001