When you look broadly at US consumers, they’re in great financial shape. After more than a decade of soaring stock prices and home values, the total net worth of US households relative to income is hovering near all-time highs – a seemingly stellar economic indicator.
The thing is, this broad view obscures some critical undercurrents. The wealth boom has disproportionately favored the upper echelon of earners, who have reaped the benefits of appreciating asset prices and are now also enjoying higher returns on their savings. This segment is very much behind the wheel on consumer spending, and driving gains in the wider economy.
Contrast that with the less fortunate half of the population: for folks who are burdened by debt, or otherwise unable to invest or save a lot, the economic landscape looks starkly different.
This chart from market strategist Michael Green offers a stark illustration of the economic realities for the “median” American household – in other words, one that sits right at the midpoint of the income spectrum, with half of households earning more and half earning less. This approach provides a clearer picture of how the price pressures are playing out for regular people, without distortions that come from the ultra-rich. For context, the median US household income is about $75,000 a year.
The chart tracks just how much disposable annual income households have after covering the essentials, like food, gas, and interest payments. It shows that after a long, steady increase, the amount flatlined in 2011, and when adjusted for inflation, it has been gradually falling. Put more simply, rising costs for need-to-have items have outpaced income growth, and that’s chipping away at the purchasing power of many Americans.
Now sure, focusing solely on costs like food, fuel, interest, and rent might be somewhat selective, but it clearly illustrates the pinch felt by many. And the fact that they’re having to tighten their belts may well be contributing to the growing political polarization and the muted consumer sentiment that persists despite surface-level economic success.
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