A ‘richcession’ may be underway
“In most recessions, unemployment rises more for lower-income groups,” explained Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers.
“Although we are not currently in a recession, the demand for and wages of lower-income groups are surpassing those of higher-income groups.”
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The beginning of the year was marked by waves of layoffs. Employers announced plans to cut 481,906 jobs in the first seven months, a 203% increase compared to the same period last year, according to Challenger, Gray & Christmas, a global outplacement and business and executive coaching firm.
Some sectors, such as banking and technology, have been hit especially hard. Earlier this summer, a series of Wall Street layoffs further fueled concerns of an impending recession driven by professional job losses.
However, there is still a shortage of workers to fill open positions in the service industry, and the unemployment rate remains near a 50-year low at just 3.5%.
Implications of a ‘richcession’ for consumers
“Recession is a loaded term,” stated Jacob Channel, senior economist at LendingTree. “While white-collar jobs may not be as abundant as they were last year, they still exist.”
And “despite signs of a decline in white-collar hiring, the broader economy as a whole is showing resilience,” Channel added.
Regardless of the country’s economic status, many Americans are facing higher prices and have depleted their savings, resorting to credit cards to make ends meet.
Several reports indicate a deterioration in financial well-being. Rather than a “richcession,” this situation more closely resembles a K-shaped recovery, according to Greg McBride, Bankrate.com’s chief financial analyst.
Wealthy Americans are not necessarily suffering, but credit card debt has reached an all-time high and 61% of adults are living paycheck to paycheck. “These are signs of financial strain,” McBride noted.
Ultimately, the definition of this economic period will only become clear in hindsight. “Typically, by the time a recession is declared, the recovery is already underway,” McBride said.
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