ROCHESTER, N.Y. — Monday’s Consumer Alert is all about your spot on the slope. Are you slipping or soaring? In today’s economy you’re likely doing one or the other.
This Consumer Alert is brought to you by the letter K because we have a K-shaped economy. That’s the conclusion of most economists and the Federal Reserve. There’s lots of evidence that following COVID the recovery has been K-shaped with the rich forming the upward angle of the K and low- and middle-income folks often on a financial free-fall – forming the downward line.
The rich are getting very rich. In the second quarter of this year folks in the top 10% accounted for almost half of all spending.
Stephen Kates, Bankrate analyst: “The stock market is doing really well. So those that have a lot of stock market assets, who own homes they’re seeing a lot of appreciation currently and have seen a lot over the last five years.”
All the while the poor and middle class are being hit hard by inflation and tariffs because the poor spend a larger part of their income on essentials.
Stephen Kates: “Those with higher incomes are seeing faster wage growth. Those with lower incomes are seeing more stagnant wage growth or in some cases are seeing negative wage growth when you take inflation into account.”
And their credit ratings are taking a big hit. A report by TransUnion reveals that in the third quarter of 2021 11.8% of Americans had the worst credit rating below 600. Today that’s 14.4%.
In the meantime, those with the highest credit rating above 780 made up 38.4% of the population in 2021. Now it’s 40.9%.
And that puts us all in a more precarious position. A big stock market drop could topple an economy so dependent on the top 10%.
Stephen Kates: “Hopefully some of the moves from the Federal Reserve and from the government can start to shift those.”
Deanna Dewberry, News10NBC: “So do you have advice for those middle income and lower income folks to endure this K-shaped economy.”
Stephen Kates: “Unfortunately one of the ways to try to stay afloat is to try to be very intentional about your spending.”
He says if it feels like you’re working just as hard but not getting ahead, you’re right. That’s because for many Americans, inflation is rising as fast or faster than wages.
He says the way to keep the “K” from kicking us all in the keister is finding ways to make more – a side hustle, overtime. And cut all fat from the budget.