Back to posts

I Don’t Get It!

June 27, 2024 | Posted in: Insights

Several of my recent posts have focused on the fact that Americans seem gloomy despite statistics that consistently point to a strong economy. As compared to pre-Covid levels, disposable personal income is up 25% and household net worth is up 38%. People are enjoying themselves as demonstrated by retail sales that are up 33%, sales of restaurants and bars that are up 34%, and foreign travel that is up 21%. Cash balances in money market funds are up 61% and the stock market is at an all-time high. Finally, consumer debt payments as a percent of income are near all-time lows. Folks, it doesn’t get much better than this!

Yet, a recent poll by the Federal Reserve Bank of Philadelphia found that 33% of the respondents were worried about making ends meet during the next six months. I am not too surprised by that number because the inflation we experienced in 2022 and 2023 clearly strained a lot of budgets. However, the poll found that 30% of those earning at least $150,000 were also concerned about their finances. Thirty-seven percent of the high earners say they are cutting discretionary spending, 17% report cutting essential spending, 14.6% report borrowing from friends or family, and 14% report taking money out of retirement savings early. For perspective, $150,000 in income is roughly twice that of the median household.

I have a hard time explaining the angst among the high earners. Perhaps they are responding to negative media coverage of the economy or our dysfunctional political environment. Alternatively, they may have ratcheted up their spending and expectations to the point that it is difficult to sustain them, even with relatively high incomes. I don’t get it!