The recession is already here for the rich
- The US is edging closer to a dream economic scenario – where inflation falls without a sharp spike in unemployment.
- But some of the country's wealthiest people are already feeling worse off.
The US is edging closer to a dream economic scenario – but some of the country's wealthiest people probably aren't feeling too thrilled.
Inflation in the US is cooling toward the Federal Reserve's 2% target, with unemployment holding steady at 3.6% in the face of the central bank's aggressive interest-rate hikes.
Forecasters have even started to feel rosier about growth, estimating that the US's Gross Domestic Product rose 1% last quarter, according to the Philadelphia Fed.
But that doesn't mean some people aren't feeling the pain. There is a different kind of economic slump on the horizon – a so-called "richsession".
Wall Street Journal reporter Justin Lahart coined that term at the start of this year to refer to a downturn that disproportionately impacts some of the country's wealthiest people.
Lahart wasn't referring to Elon Musk and Mark Zuckerberg – whose billion-dollar fortunes are ballooning thanks to the AI-fueled stock-market rally – but instead to people whose annual salary puts them in the top 25% of US wage earners. Members of that group make over $90,000-a-year, per the Bureau of Labor Statistics.
Layoffs hit that group particularly hard in the first half of 2023, with high-paying firms ranging from Meta Platforms to Goldman Sachs slashing jobs in an effort to cut costs.
Wage growth for the bottom 25% has also outpaced the top quartile over the past 12 months, per the Atlanta Fed, while a major slowdown in spending on luxury brands is another sign that the ultra-rich are starting to fret about an economic slump.
For some, the "richsession" will be a cause for celebration, a potential leveller in a country where inequality outpaces other rich nations, and wealth is disproportionately concentrated in the hands of the top 1%.
For others, it's merely a reminder that the economy is slowing down – but not necessarily in the way that we've come to expect.