SAN FRANCISCO (MarketWatch) — The generation we once called “slackers” has a new label: “debtors.”

That might not sound surprising. After all, why wouldn’t someone who slacks off not end up in debt?

The truth is that Generation X (the population born between 1965 and 1980) has grown up to be an economic engine. Yes, much research has pointed out that Generation X is likely to be the first generation in history to be less better off financially than the generation that preceded it.

When adjusted for when boomers were the same age, Gen X’s average household income lags the previous generation by 12%. And it’s been hardest hit by falling incomes. The gap between the income of the richest 5% of Generation X and the poorest 20% grew 21% between 1992 and 2012, more than any other age group, according to Bankrate, a banking-research firm.

But studies and census data show that unlike baby boomers, Gen Xers tend to be nimble in the economy. Its workers are better educated, more entrepreneurial and more comfortable moving from job to job, or employer to employer.

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They also have a higher concentration of women in the workforce. That means more Gen X households have two incomes rather than a traditional single bread winner.

In terms of age, Generation X is also in its working prime for income growth and spending. Gen Xers have families, buy cars and goods. Collectively, this generation with its earning and spending potential could shake up the economy and power profits.

Unfortunately, as the 82 million Gen Xers entered prime home-buying age, they got walloped with a mortgage bubble. Home ownership rates for those aged 45 to 54 is 71%, and it’s 60% for those 35 to 44. Those age groups trail only the 76% of baby boomers who own their homes.

Now, a new study by William R. Emmons and Bryan J. Noeth and published Aug. 27 by the Federal Reserve Bank of St. Louis underscores how deep the recession cut Generation X and chronicles its lingering effects.

While U.S. incomes have risen 23% and household debt levels have fallen 12.5% since the depths of the Great Recession, the negative financial fallout remains pronounced for Generation X, according to the study. It’s carrying the biggest debt burden, which includes credit card balances, mortgages and student loans, of any generation before or after.

Generation X’s household debt is an average 60% higher than that of baby boomers at the same stage of the age cycle, or $142,077 versus an inflation-adjusted $88,553, the study said.

Emmons and Noeth note that rising home values and income have helped mitigate household debt and that Gen X is making progress paying it down — it was more than $160,000 in 2008. But, they argue, the still-massive debt burden is slowing down the generation that should be driving the economy.

“Families that are reducing their debt are, by definition, not spending all of their income,” the report concluded. “Given the evidence of widespread ongoing debt declines among younger families, overall economic growth will be damped for some time.”

The findings underscore a study by the Pew Charitable Trust in May 2013 that found Generation X lost 45% of its wealth in the recession, compared with 28% for baby boomers. It concluded that Gen X did not have adequate resources for when members reach retirement age.

The upshot of all this is multifold for investors. For one, lingering mortgage debt affects the mobility of Generation X and its workforce. It’s tougher to leave a home that’s not worth what’s owed on it. There were 9.7 million so-called underwater mortgages at the start of May, according to real estate web site Zillow.

Just as significant is spending. As the authors noted, you can’t spend money you’ve already committed to servicing debt.

The lone bright spot? Generation X has the highest employment rate, around 77%, according to the Bureau of Labor Statistics, and is making some headway. That’s good news for banks and other lending institutions.

Financial institutions have stanched the bleeding of credit losses mostly because so many homeowners of this age group are paying back their debts. We’ve seen that in the last year of earnings from major lenders. Reserves for loan losses have been slashed as defaults have dropped.

Ultimately, the debt burden for Generation X combined with its already relatively low historical wages and income help to explain why, at least on a demographic level, the U.S. economy isn’t surging ahead to match the market’s gains. For investors, this should be alarming given that this era is Generation X’s time to lead.