Are We Heading for a Recession? Look to Millennial and Gen Z Spending for Early Clues

While policymakers debate interest rates and economists analyze GDP reports, many of the most telling recession indicators are clearly visible in how young Canadians spend, save, and cut back. 

A recent Politico article highlighted unconventional signs of economic strain, such as rising roommate arrangements, falling freight volumes, and increasing loan delinquencies. These trends are particularly pronounced among Millennials and Gen Z, who are at the forefront of inflation, housing unaffordability, and precarious employment. 

Meanwhile, a Wall Street Journal piece noted that Gen Z is interpreting various pop culture trends, such as the resurgence of Y2K fashion and the popularity of press-on nails, as humorous yet anxious indicators of a potential recession. This behaviour underscores a deeper public unease about the economy, particularly among younger people who are less engaged with traditional measures like Treasury yields or unemployment reports. 

In Canada, Here’s What to Watch: 

The Return of Roommates and Intergenerational Living

From Toronto to Vancouver, we're seeing a rise in multigenerational households. Many younger adults are choosing to remain with their parents or cohabit, not by preference, but out of necessity. The formation of new households is stalling, indicating clear signals of economic stress. 

The Lipstick Index 2.0 

Coined during previous downturns, the “lipstick index” suggests people still splurge on small luxuries when they can’t afford big ones. In 2024–25, we’re witnessing its evolution: Gen Z is spending more on affordable self-care (like skincare, candles, and even niche snacks) while cutting back on larger items such as fashion, electronics, and travel. Small indulgences persist, but they signal something deeper: economic caution. 

Thrifting, delaying, and digital bargain hunting

Younger Canadians are postponing major purchases, whether it’s a car, a condo, or a vacation. Instead, they are choosing used goods, repair culture, and buy-nothing groups. Flash sales, second-hand platforms like Depop and Facebook Marketplace, and price-comparison apps are thriving. 

Shifting from Ownership to Access

Subscription models and renting—whether it’s clothing or furniture—are replacing traditional ownership. This indicates a change in financial priorities. For businesses, this isn’t just a lifestyle trend; it represents a structural shift in how younger Canadians perceive value and risk. 

Debt fatigue is Real

Despite record levels of student loans and consumer debt, many Millennials and Gen Zers are making efforts to pay down their debts, often at the expense of current consumption. Credit card delinquencies in Canada are rising, particularly among those under 40. 

Implications for Canadian Businesses: 

Read Between the Transactions

Just because someone buys a $9 lip gloss doesn’t mean they’re thriving. It might indicate that they’re substituting a trip to Sephora for a vacation they can’t afford. Small luxuries often conceal larger anxieties. 

Shift to Value,Not Just Price

Canadian consumers aren’t just hunting for cheap; they’re seeking worth. Durability, ethical sourcing, and versatility matter. “Buy less, but better” is the new mantra. 

Don’t Assume Loyalty 

Economic pressure is making younger consumers less brand loyal. A single negative experience or a better deal elsewhere can prompt them to switch. Businesses must invest in authentic relationships, not merely transactions. 

Watch Inventory Risk

High-ticket items may remain on shelves for extended periods. Businesses should closely monitor demand elasticity and refrain from overstocking premium goods without strong, data-supported forecasts. 

In summary, Canadian Millennials and Gen Z aren’t just consumers—they’re early warning signals. They show us where the economy is headed long before official reports catch up. 

What are you noticing in your business or industry? Are your younger customers spending differently in 2025? 

Let’s discuss what this means for a potential recession strategy and resilience.