It's Tough Out There

It seems like more now than ever how the economy is doing depends on who you ask. People with assets like houses and stocks have been saying they're doing well even if many are worried about the health of the republic. The wealth effect (the psychological boost from rising asset prices) is in full force for affluent folks.

Many of these people are also in the top 10% of earners who account for nearly 50% of all consumer spending in our economy. The rest are in the next 10% and add roughly another 10% to spending and round out the 20% of those considered affluent.

All this spending has been buoying the economy for a while and helps reduce recession risk, but the rising tide hasn't been lifting all boats.

The other 80% of consumers cover the remaining 40% of spending and many (maybe most) of these folks are strained. Sustained inflation in key areas, a tight job market and stagnant wages, high borrowing costs, and repaying student loans – one or all these are hitting the average American consumer pretty hard. And the impacts tend to worsen as you go down the age spectrum.

This is an important structural issue within an otherwise healthy economy. While not necessarily new information, numerous sources have been reporting lately how the yawning wage and opportunity gap continues to widen. This is especially important with emerging AI technology and the lofty expectations for how it might impact the workforce.

My research partners at Bespoke Investment Group came out with a good piece last week looking at how younger Americans are doing economically when compared to other generations.

[Analysis of younger Americans' wealth, wages, and unemployment trends - content summarized for brevity]

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