The share of spending by the top 10 percent keeps rising.
Economy Increasingly Dependent on the Wealthy
The Wall Street Journal reports The U.S. Economy Depends More Than Ever on Rich People
Many Americans are pinching pennies, exhausted by high prices and stubborn inflation. The well-off are spending with abandon.
The top 10% of earners—households making about $250,000 a year or more—are splurging on everything from vacations to designer handbags, buoyed by big gains in stocks, real estate and other assets.
Those consumers now account for 49.7% of all spending, a record in data going back to 1989, according to an analysis by Moody’s Analytics. Three decades ago, they accounted for about 36%.
Between September 2023 and September 2024, the high earners increased their spending by 12%. Spending by working-class and middle-class households, meanwhile, dropped over the same period.
Taken together, well-off people have increased their spending far beyond inflation, while everyone else hasn’t. The bottom 80% of earners spent 25% more than they did four years earlier, barely outpacing price increases of 21% over that period. The top 10% spent 58% more.
A stock market selloff or decline in home values that rattles the confidence of the top 10% and causes them to cut back would have a significant effect on the economy. Consumer sentiment is starting to slide overall, including for the wealthiest third of consumers, thanks in part to tariff threats.
None of this is surprising. I have been discussing the two-state economy of the asset holders vs the renters for a long time.
The two-state economy decided the election as young voters and Blacks switched to Trump in record numbers.
This means Trump needs to deliver on inflation, but he can’t afford a recession to deliver.
The CPI, PPI, and home prices are not heading in the needed direction and there are many signs of a weakening economy including jobs, retail spending, immigration, and housing.
Trump’s tariffs rate to be a disaster and that could be the straw that finally breaks asset prices.
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