The US economy is experiencing a “selective recession” where lower-income Americans are struggling due to rising costs and dwindling savings, while upper-income consumers remain unaffected. Inflation, although cooling down, has significantly impacted the purchasing power of lower and middle-income individuals. With the pandemic savings having been depleted for most Americans, recession fears are now growing as the job market weakens and interest rates remain high.
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The US economy is in a “selective recession,” as lower-income Americans are struggling to get by while upper-income consumers are doing just fine, according to JPMorgan analyst Matthew Boss.
Speaking to CNBC on Tuesday, Boss pointed to the divergence in upper-income and middle-to-lower income Americans, the latter of whom are struggling to keep up with the rising cost of living as prices remain elevated and savings dwindle.
Other market commentators have pointed to a coming slowdown in consumer spending, especially as middle-class Americans feel the pinch of inflation.
Each month that we move forward, it doesn’t matter that inflation is not worsening, it’s just an incremental toll on that savings that they built," Boss said.
Excess savings from the COVID era were probably depleted in March of this year, according to a paper from San Francisco Fed economists.
Recession fears have been on the rise as Americans survey a weakening job market and anticipate rates staying higher for longer.
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