In the fall of 2008, Rebekah Frank applied to graduate school. At the time, housing foreclosures, bank bailouts and recession fears ruled the election-year debate stage.
Ms. Frank entered her program in the fall of 2009, studying international affairs. She worked in bars and restaurants in New York City to pay her bills. Since graduating, she stayed employed in the restaurant industry and paid off her student loans five months ago.
“Being under debt, I hate that feeling,” she said. “It gives me so much anxiety.”
Now, Ms. Frank and millions of other young Americans are again facing the prospect of a new, sudden recession—and she is terrified of going back into debt. The two bars where Ms. Frank works closed last month, following stay-at-home orders. She became one of the 22 million Americans seeking unemployment benefits.
Graduating during the last financial crisis had far-reaching financial consequences for many young Americans. In April 2010, the unemployment rate for those 20 to 24 years old reached a peak of 17.2%. The earnings losses of those graduating into a recession take up to 10 years to disappear, according to the National Bureau of Economic Research.
When her workplaces closed, Rebekah Frank became one of the 22 million Americans seeking jobless benefits.
Photo: Gabby Jones for The Wall Street JournalLike Ms. Frank, many young Americans felt as though they were just getting back on their feet before the pandemic shut down the U.S. economy.
The specter of another recession—coupled with the stress of the pandemic and self-isolation—can resurrect many of the negative feelings and memories from the last one, said Lauren Hersch Nicholas, associate professor of public health at Johns Hopkins University.
In 2013 research analyzing the effects of the 2008 recession, Prof. Nicholas saw more people experiencing a sudden loss in wealth. This led to a “recession depression,” or growth in reported feelings of stress and negative mental health. Prof. Nicholas also found a “large effect”—a 6.2 percentage point increase—in the use of antidepressants and other prescriptions to battle this “recession depression.”
“I think this is a very scary time for a lot of people,” she said. “Every time you look at the news, there’s been another huge increase in the unemployment rate. There’s this feeling of ‘If I can’t do my job, is the social safety net even going to be there for me?’ and it’s increasingly uncertain with the current types of jobs a lot of people have.”
This sense of uncertainty can also lead to a feeling of paralysis, said Dan Ariely, a professor of behavioral economics at Duke University.
He described a feeling of learned helplessness that he sees in people continually set back by unpredictable financial situations. Without understanding the scope of a financial crisis and its ramifications, people struggle to find a sense of resiliency.
The Gate in Brooklyn’s Park Slope, where Rebekah Frank worked before the pandemic.
Photo: Gabby Jones for The Wall Street Journal“We can receive the same amount of bad luck or bad consequences, but if we don’t know why it’s coming, we have a much harder time understanding it and a much harder time recovering psychologically,” he said. “I think in the financial crisis, we got some explanations. Here, we don’t even understand the enemy.”
Even graduating into a recession didn’t adequately prepare many for a new economic downturn. The recovery of the past decade presented many opportunities for many Americans. But as the cost of living rose and wages for many stagnated, millennials weren’t always able to take advantage of opportunities.
Millennial households had an average net worth of about $92,000 in 2016, adjusted for inflation. That is nearly 40% less than Gen X households (people born between 1965 and 1980) had in 2001 and about 20% less than baby boomer households (born from 1946 to 1964) had in 1989, according to Federal Reserve data.
“They’re very ill-prepared for catastrophe,” Prof. Ariely said. “That is tough for the millennials, because it’s a generation that is very optimistic—or was, optimistic.”
As Ms. Frank found out, it’s hard to save for a rainy day when it seems to never stop raining.
Rebekah Frank says she worked hard to get out of debt, at the expense of her savings.
Photo: Gabby Jones for The Wall Street Journal“Because I prioritized paying my loans off, I had payments every month and I normally would have been putting that aside, so my income was going up at a slower rate than the cost of living went up,” she said.
Ms. Frank said that while she worked hard to get out of debt, she did so at the expense of her savings account. She didn’t build as much of an emergency savings fund as she now wishes she had.
Prof. Nicholas said she expects to see more people experiencing many of the same mental health effects she previously studied—depression, anxiety, stress and more. But the unique circumstances of this downturn make it harder to understand how people will cope.
“I have a feeling this will be a completely different sort of recession than the one we saw in 2008,” said Ms. Frank. “It feels like a thing I don’t understand, like a lot bigger of a monster than the last one did, at least to me.”
Write to Julia Carpenter at Julia.Carpenter@wsj.com
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