The US economy is currently experiencing what JPMorgan analyst Matthew Boss describes as a "selective recession." This economic phenomenon is characterized by a stark divide between lower-income consumers who are struggling and high-income households that are seeing significant wealth creation.
According to Boss, high-income consumers are driving approximately $40 trillion worth of spending into the economy, representing about half of all consumer spending in the US. In contrast, lower- to middle-income consumers are facing challenges as the cost of living continues to rise. The bottom 20% of consumers are contributing only 10% of the economy's total spending, based on national retail sales data.
The wealth gap between the richest Americans and the rest of the population has widened significantly over the past four years. The top 10% of households have gained $30.5 trillion in wealth since 2020, while the bottom 50% of Americans have seen much smaller gains. This disparity could be attributed to the fact that high-income households own the majority of household stock, while lower-income households are more affected by inflation.
Middle-income consumers are also feeling the impact of rising prices, with many reporting financial stress and difficulties in saving. A recent survey conducted by Primerica found that less than half of middle-income households rated their finances as "excellent" or "good," and a majority rated their ability to save as "not so good" or "poor."
Overall, real retail sales have declined by 4% year-over-year in the first quarter, leading some economists to warn of a potential consumer-led recession. As the economy continues to navigate these challenges, it is crucial to address the widening wealth gap and support policies that promote economic stability and opportunity for all Americans.