Sticky inflation, white-collar layoffs, and surging interest rates are all putting pressure on a certain type of American — higher-income earners.

‘What we normally see in an economic recession is that lower- and moderate-income households really bear the brunt of it in terms of job losses and financial hardships,” said Greg McBride, senior financial analyst at Bankrate.com. “We haven’t seen that.”

The stock market, a source of wealth for the rich, struggled in 2022. The S&P 500 sank more than 19%. The same year, 1.8 million Americans lost their millionaire status, according to UBS’ 2023 Global Wealth Survey. Despite the stock market’s summer rally in 2023, the U.S. economy faces several headwinds.

Bank of America’s Consumer Checkpoint Survey for September 2023 found that high-income households have become more pessimistic about the economy. The same group also appears more cautious about spending because of soft wage growth and job creation for high earners.

Watch the video above to find out more about how the so-called “richcession” could affect the entire economy.

Chapters:
0:00 — Introduction
01:30 — How did the ‘richcession’ happen?
02:56 — The wealth effect
05:26 — How is the luxury consumer holding up?
07:00 — The return of the millionaires?

Produced by: DeLon Thornton
Edited by: Evan Miller
Additional Camera: Kate Sammer, Sean Conlon, Brad Howard
Supervising Producer: Jeff Morganteen

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The Recession Has Finally Begun, But Only For America’s Rich…(read more)

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The Recession Has Finally Begun, But Only For America’s Rich

The economic downturn caused by the ongoing global pandemic has hit nations around the world, triggering recessions and pushing millions into poverty. However, while the majority of people struggles to make ends meet, it seems that this crisis has had a different impact on America’s wealthy elite. As the recession takes hold, it becomes clear that its effect is mostly confined to the rich.

One might argue that the rich are always the least affected during times of economic turmoil, but this time it’s different. Typically, economic downturns lead to widespread unemployment, business closures, and declining stock markets. However, in the early stages of this recession, the stock market crashed, manufacturing sector plummeted, and unemployment rates soared, causing significant economic distress across the board.

But soon enough, a pattern started emerging. The government swiftly responded to the crisis with economic stimulus packages and various safety nets to aid struggling individuals and businesses. However, these measures disproportionately benefited corporations and the wealthy while leaving the majority of working-class Americans to shoulder the burden. As the rich received bailouts and tax breaks, ordinary citizens were handed insufficient relief checks, and small businesses sought bankruptcy protection.

The pandemic also exposed existing inequalities in America’s workforce and unearthed the fragile economic dynamics. While millions of low-income workers, particularly in the service and hospitality industries, faced furloughs and layoffs, the wealthy class retreated to the safety of their financial portfolios. Instead of facing economic hardship, they started benefiting from the slump. With interest rates hitting rock bottom, borrowing became extremely cheap, enabling the rich to make huge investments, crushing the value of regular investors’ savings in the process.

Furthermore, as the property market took a hit, the rich seized the opportunity to increase their wealth by buying up distressed assets and acquiring real estate at bargain prices. While middle-class families worried about paying their mortgages, the rich invested, knowing the market would eventually rebound. This created a vicious cycle, exacerbating inequality as the rich grew richer and the middle class fell further behind.

Moreover, as the demand for luxury goods plummeted, the wealthy redirected their spending towards private jets, yachts, and exclusive resorts, further widening the economic gap. The lavish lifestyles of the rich became ostentatiously apparent amidst the crisis.

As the dust begins to settle, it becomes evident that America’s rich have not felt the full force of this recession but have, in fact, managed to profit from it. This stark contrast exposes the systemic injustices that have allowed the wealthiest to avoid economic suffering while the majority struggles to survive.

If we are to learn any lessons from this crisis, we must address these inequalities head-on. The government should ensure that economic stimulus packages prioritize those most in need, such as small businesses and struggling families. We must focus on creating a fair and just society where all citizens, regardless of their wealth, can benefit from government assistance during tough times.

The recession has begun, and its impact is felt by millions. It’s high time we acknowledged the unequal consequences it has imposed on America’s wealthy elite versus the working-class population. Only by rectifying this imbalance and creating an equitable society can we truly recover from this crisis and build a future where all citizens have a fair shot at prosperity.