Business
As more Californians fall behind in making debt payments, one group stands out
Stubbornly high inflation and interest rates are taking an increasing toll in California as the state experiences rising unemployment and slowing wage gains. And those feeling it the hardest: the largest and perhaps most budget-minded generation of them all.
Millennials, those roughly 28 to 43 years old, are generally thought to be more averse to debt and better savers than earlier cohorts such as Gen X (44 to 59 years old) and baby boomers (60 to 78).
But new data from the California Policy Lab at UC Berkeley show that while consumer debts overall are growing and becoming more difficult to manage for all but the very oldest generation in America, millennials are having the most trouble making their loan payments on time.
In the first quarter, 7.6% of millennial borrowers were at least 30 days late in making monthly payments on their credit card, auto and other loans. That compares with 6% of Gen X, 5.5% of Gen Z (ages 18 to 27) and 3.3% of boomers who fell behind on their loans. The earlier Silent and Greatest generations had even lower delinquency rates.
Unlike for Gen X-ers and boomers, the overall loan delinquency rate among millennials — who make up about one-fourth of California’s population — has now climbed above pre-pandemic levels. And economists worry that financial pressures will only continue to mount, especially with an end to the student loan repayment pause. Among other things, millennials are known for carrying a lot of college loan debt.
“I see no reason to believe that delinquencies aren’t going to be tracking higher,” said Evan B. White, the California Policy Lab’s executive director.
Foreclosures and personal bankruptcies for all ages are still very low by historical standards, as is the percentage of after-tax income that households are spending on making debt payments, another important indicator of financial stress.
Even so, consumers in California and across the country have been taking on more debt in recent quarters, including credit card borrowing. And 30-day delinquencies have been creeping higher — an early warning sign of potential trouble ahead.
Thus far consumer spending, which accounts for most of the nation’s economic growth, has held up well. But many people are feeling the effects of what’s been an extended period of high inflation and interest rates. A pullback by consumers could have a significant effect on the broader economy.
In the Federal Reserve’s annual report on the economic well-being of Americans, also released this week, about two-thirds of adults surveyed said that changes in the prices they paid in 2023 compared with the prior year had made their financial situation worse. And one-fifth of them said inflation had made things much worse.
The Fed report found that 72% of adults were at least “doing OK” financially, similar to the 73% figure in 2022 but well below the recent high of 78% in 2021.
U.S. households continue to benefit from a strong labor market, including solid, if slightly smaller, gains in wages. The nation’s unemployment rate was 3.9% in April, the 27th straight month in which the jobless figure has been below 4% — the longest such stretch since the 1960s.
California’s employment situation, however, has not been as strong. The pace of job gains statewide has lagged behind the nation’s. And California’s unemployment rate of 5.3% last month was the highest in the country, reflecting weakness in key sectors such as entertainment, high tech, and business and professional services. The number of unemployed workers in the state has increased by 164,000 over the last 12 months, according to California’s Employment Development Department.
Meanwhile, wage growth has slowed more in California than for the nation overall — and it’s now running below the rate of inflation, meaning workers’ purchasing power is shrinking.
In the 12 months ending in April, the average hourly earnings for all private employees in California were up 1.4% from the prior year. That’s less than half the rate of both wage growth and inflation for the United States. In contrast, from 2016 to 2022, California employees saw wage gains averaging 3% to 6% per year.
Nationally, aside from student loans, delinquencies on all types of consumer debt have been steadily rising since the end of 2021, according to the New York Fed.
During the first two years of COVID-19, consumers paid down their debts significantly, thanks in part to stimulus checks and other government programs. But since then, credit card delinquencies, in particular, have risen above pre-pandemic levels, and an increasing share of borrowers are maxing out on their plastic, most of them younger adults.
Why millennials seem to be struggling more financially may seem puzzling at first. They’re the best-educated generation and the first to grow up in the digital age. But many millennials also had the misfortune of entering their formative adult lives amid the Great Recession that began in late 2007 and left a trail of job and financial hardships for some years. Saddled with student loans and other debt, they have been slower to move out of their parents’ homes, start families and build wealth compared with earlier generations.
More recently, with home mortgage rates and home prices having soared, many millennials are stuck in apartments and feeling the squeeze of higher rents and prices for certain services that they are likely to need given their stage in life, like day care.
In fact, the Fed’s economic well-being report found that while there was little change for most population groups between 2022 and last year, one notable exception was parents living with their children under age 18. Given that women are having children later, this group would include a disproportionate share of millennials.
“Those are years when you’re moving into higher expenses of buying homes, buying cars and even setting aside money for children’s college,” said Greg McBride, chief financial analyst at Bankrate.com, which has studied generational differences in handling debt. “When we’ve experienced the type of inflation we’ve had, that really puts the squeeze on tight budgets.”
Elon Musk wants to take investors on a ride to the moon — and beyond.
His pioneering rocket company SpaceX filed Wednesday for what’s expected to be the largest initial public offering in history, potentially raising at least $75 billion and valuing the company at as much as $2 trillion.
The registration statement with the Securities and Exchange Commission for an expected public offering next month explicitly sets aside stocks for retail investors, though the exact number will be spelled out in a later filing, as will the offering price and company valuation.
Interest in the stock offering is expected to be high despite the billionaire’s controversial politics, including his involvement last year with the Department of Government Efficiency, the makeshift cost-cutting effort that resulted in the loss of hundreds of thousands of government jobs.
“Potential investors are probably just as polarized as the electorate is too, given his dabbling in politics,” said Carol Schleif, chief market strategist for BMO Private Wealth. “But it’s not just the SpaceX IPO per se, it’s a bigger, broader excitement among investors for space investment in general.”
Investor interest was piqued by the Artemis II moon mission this year that SpaceX did not participate in, she said. However, the company is expected to play a larger role in future missions that take astronauts to the moon..
Ultimately, Musk, 54, wants to establish a colony on Mars but those plans have been set on the back burner, with NASA now focusing on moon missions.
Musk will remain the company’s chief executive and chairman. Under a dual-class stock structure as a holder of special Class B shares he will be able to control the election of directors, the filing says.
The IPO is expected to be at least twice as large as the current record holder: Saudi Aramco, the state-controlled national oil and gas company of Saudi Arabia, which raised nearly $30 billion in 2019.
Nearly two dozen banks will be underwriting the IPO and offering shares to investors, including Goldman Sachs, Bank of America and Citigroup.
Founded in 2002 in El Segundo, SpaceX has revolutionized the aerospace industry by developing the reusable Falcon 9 rocket that has radically lowered launch costs.
The company moved its headquarters from Hawthorne to Texas in 2024. However, SpaceX retains large operations in the South Bay city and blasts off regularly from Vandenberg Space Force Base in Santa Barbara County.
Scores of former SpaceX employees have launched startups in Southern California, including rocket company Relativity Space, hypersonic missile startup Castelion and satellite manufacturer Apex Space.
Since developing its reusable rocket technology, SpaceX has established its Starlink network as the leading satellite-based broadband internet service. It also is moving into satellite-based cellular service and this year merged with Musk’s xAi artificial intelligence company that also included his X social network.
Marco Cáceres, an aerospace analyst at Teal Group, said that the advantage of going public for SpaceX lies in the IPO’s ability to raise a large amount of capital quickly to complete development of its Starship rocket.
“It is going to dominate the market even more than the Falcon 9 is dominating the market now,” he said. “That’s going to be ultimately what’s going to drive their business for the next 10 years.”
The 12th test launch of Starship is set for Friday from the company’s south Texas launch facility. The rocket is the third version of craft, standing more than 400 feet tall and with about three times the payload of the second version.
The regulatory filing claims that the market for its rocket, internet and mobile telephone businesses could be as large as $28.5 trillion.
SpaceX also plans to launch thousands of orbiting data centers powered by the sun that would perform AI calculations.
With the company making massive capital investments, it recorded a $4.28-billion loss in the first quarter. Last year, it recorded $18.7 billion in revenue and lost $4.94 billion, according to the filing.
The public offering is expected to hit the market next month after a “road show,” during which SpaceX will seek to drum up interest from institutional and retail investors.
It will arrive after a fairly quiet year for IPOs that was brightened last week when Cerebras Systems, a Sunnyvale company that makes semiconductors for AI supercomputers, went public.
Shares at Cerebras were offered at $185 and jumped 68% on its opening day. They closed Wednesday at $290.69.
Matt Kennedy, a senior strategist at Renaissance Capital, said the SpaceX offering would dwarf that of Cerebras, as it is expected to raise more than every IPO combined in the last two years.
“A win here or a loss could really impact the IPO market,” he said. “The sheer size of this deal is going to make or lose fortunes.”
Among the oddest disclosures of the IPO is a decision by the company’s board in January to grant Musk 1 billion Class B shares if the company reaches a certain market capitalization and establishes a “permanent human colony on Mars with at least one million inhabitants.”
Erewhon opened its newest location in Glendale on Wednesday, marking the luxury grocer’s 14th store in Southern California with more set to open soon.
The new store, located at 520 N. Glendale Ave., includes the chain’s signature cafe and tonic bar as well as an indoor-outdoor patio space.
Known for its upscale, trendy products and high prices, Erewhon has grown into a tourist destination in Los Angeles and a hot spot for celebrities and influencers.
The Glendale location will bring Erewhon staples to trendy consumers in the area, including the beloved Strawberry Glaze Skin Smoothie, which until last year was named after the model Hailey Bieber.
Employees at the store handed out complimentary gift bags and fresh flowers during the grand opening Wednesday morning.
“This location was designed to reflect the spirit of the neighborhood while creating a welcoming space to gather, centered around wellness, connection, and a commitment to the quality standards that define Erewhon,” Erewhon President Josephine Antoci said in a statement.
The company purchased the space, which was formerly a hardware store, in 2024.
Erewhon has locations in several of Southern California’s wealthiest areas, including Calabasas and Beverly Hills. It also has stores in Venice, Manhattan Beach and at the Grove.
“Erewhon’s decision to invest in Glendale reflects confidence in our city’s economic future,” Glendale Mayor Ardashes Kassakhian said in a news release.
The grocer was founded in 1966 by Japanese immigrants Michio and Aveline Kushi — pioneers of the natural-foods macrobiotic movement — who began selling imported organic goods out of their Boston home. In 1969, the company opened its first Los Angeles location on Beverly Boulevard.
Josephine and Tony Antoci bought the company in 2011 and helped launch it to its luxury status with a cult-like following. Tony serves as chief executive while Josephine handpicks much of the store’s merchandise.
By the mid-2010s, Erewhon had become a watering hole for celebrities such as the Kardashians and the Beckhams.
The company has its eye on further expansion. A Thousand Oaks location is slated to open this August and stores in Costa Mesa and downtown Los Angeles are planned for 2027. An Erewhon cafe opened in the Los Angeles County Museum of Art’s new David Geffen Galleries earlier this month.
The Pacific Palisades location, which shut down after the wildfires last year, is set to reopen in January.
The Glendale Erewhon takes the place of Virgil’s Hardware Home Center, which opened in 1932 and closed in 2019.
Volvo Group North America has agreed to pay nearly $197 million to resolve allegations from California regulators that company’s heavy-duty truck engines violated California emissions standards and certification requirements.
About 10,000 diesel truck engines manufactured by Volvo were equipped with an undisclosed device, causing them to release excessive levels of smog-forming pollution across California, according to the California Air Resources Board, the state agency that regulates air pollution and greenhouse gases.
Volvo is developing a software fix to repair many of these vehicles and extend their warranties at no cost to the owners. Eligible truck owners are expected to be notified of a non-mandatory recall on these trucks next year.
CARB found inconsistencies in the Swedish automaker’s data while testing trucks with Volvo engines from model year 2010 to 2016, which resulted in the investigation and ensuing settlement.
“This case underscores why CARB’s compliance testing and strong enforcement are essential to protecting the state’s air quality and public health,” said Lauren Sanchez, chair of the state Air Resources Board. “Our responsibility goes beyond adopting regulations — we are committed to upholding them by identifying violations and holding companies accountable for meeting emissions standards.”
Under the settlement, Volvo will pay $17.5 million in civil penalties to reimburse the state for the cost of the investigation and support its vehicle-testing operations. Another $179 million will go toward investing in clean-air initiatives, such as electric vehicle incentive programs, to offset air pollution that resulted from the alleged violations.
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