Americans are fed up with the economy — and $100,000 earners are driving the pessimism

It is perhaps not surprising that higher inflation in decades is eroding the confidence of many Americans in the economy. More open is which group has the saddest prospects: higher-income households.

Consumer sentiment in February dropped to a one-decade low, and the fall was centered almost entirely on households earning at least $ 100,000, according to closely watched University of Michigan consumer surveys. Sentiment in this group fell by almost 13%, reflecting the concerns of higher-income Americans about rising interest rates and the impact of inflation on their personal finances, the university said.

Overall consumer sentiment in February fell to 62.8 points, down from 76.8 points the previous year.

Rising U.S. prices are affecting all Americans, and lower-income households have less room to maneuver in their budgets to cope with rising cost of everyday items, from gasoline to food. But higher-income households may be more aware of the impact of inflation, as they have not enjoyed the same income gains as lower-income workers, which means their “real wages” —or wages after taking into account inflation they are declining.

Stock market turmoil is also affecting the retirement accounts and investments of higher-income workers, fueling their anxiety. Only about 4 in 10 of the lowest-income Americans have access to retirement plans, compared to 8 in 10 of the highest-income workers.

Rising inflation concerns could translate into slower economic growth, as “an optimistic consumer is more comfortable spending and borrowing,” said Charlie Wise, senior vice president of research and consulting at TransUnion. has been studying consumption trends during the pandemic.

“And one [consumer] that is pessimistic is one that is likely to be withdrawn, “he added

Concern about inflation

The main current economic concern in the United States is inflation, according to the new Consumer Pulse study by TransUnion, published on Wednesday. But higher-income consumers worry more than lower-income Americans, according to the study.

About 66% of consumers earning more than $ 100,000 were concerned about inflation, compared to 61% of households earning less than $ 50,000, according to the study. (The survey was conducted before Russia’s invasion of Ukraine, so the potential inflationary impact on gas and other commodity prices was not reflected in the survey).

“There’s less concern about lower-income consumers, but the question is what part of that doesn’t understand inflation,” Wise said. “There is a level of financial fluidity that correlates with people’s income.”

However, low-wage workers also have demand, and this raises their wages at much higher rates than white-collar workers. Average hourly earnings of leisure and hospitality workers (waiters, hotel workers and the like) rose 13% in January from the previous year, according to the latest government data. This kept his wages well ahead of the Inflation increased by 7.5%. during the same period.

Meanwhile, workers in the financial sector, such as bankers and real estate, have seen their wages rise by 4.8% over the same period. Indeed, these workers have seen their incomes and purchasing power shrink due to inflation.

President Biden’s assessments

This is increasingly affecting the way voters view President Joe Biden, whose approval ratings on inflation and the economy have had an impact. seconds in new CBS polls. About 6 in 10 Americans say the economy is in a bad state, according to the survey.

With many economic measures, however, the nation is getting back in shape: the country’s unemployment rate was 4% in January, not far from its pre-pandemic level. Wages are rising, and most economists expect growth of at least 3%.

“It’s really the inflation that’s coming out, that’s the focus,” Wise of TransUnion said. “There are very few people out there who don’t buy groceries, don’t buy gas. It’s inevitable and it really shows up in the numbers.”

In Tuesday’s State of the Union address, Mr Biden acknowledged that inflation is consuming household income. He promised to address the costs in a spiral, adding that “my main priority is to control prices.” He outlined measures such as increasing competition among U.S. goods suppliers and cracking down on companies that he said are charging consumers too much.

However, consumers are unlikely to see any relief soon, and economists expect inflation to remain high for at least the first half of 2022.

“A few holes in the road”

Winnie Hewett, a 68-year-old retiree in Mission Viejo, California, describes her family as upper middle class. He noted that his gas bill has more than doubled from the previous year and that car rental costs increased when he visited his mother in North Carolina, from $ 800 to $ 1,200 during a month.

Hewett said he has shifted some spending, especially with his young son now in college, which has reduced his daily grocery costs. But he added that he was not to blame for Mr Biden’s inflation, which he said was due to a combination of supply chain disruptions and the influx of federal stimulus money which boosted household finances and boosted demand for goods.

“This inflation was approaching, it wouldn’t have mattered who held the position,” Hewett said.

He has also seen some of his retirement investments decline in value and hopes that the Russian invasion of Ukraine will cause more market turmoil.

“We probably have a few holes in the road ahead of us,” Hewett said, adding that it is still positive that inflation and other issues will improve throughout the year. “When you live long enough, you see the ups and downs, internationally and here at home. I just think we’ll recover.”

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• Inflation