Even the affluent are facing challenges in the current economic climate. According to research conducted by Bank of America, individuals in the United States earning at least $125,000 annually are experiencing layoffs at a rate three times higher than those with lower incomes. The research, which analyzed data on jobless benefits deposited in customer accounts, revealed a significant increase in higher-income unemployment in July compared to the previous year. The report from Bank of America observed that while lower- and middle-income households show more resilience, higher-income households are more affected by the labor market downturn.
Sectors known for offering high-paying jobs, such as technology and finance, have been particularly impacted by layoffs in recent months. Prominent companies like Meta, Amazon, Alphabet, and others in Silicon Valley have let go of over 227,000 employees since the beginning of the year, according to statistics from Layoffs.fyi. Additionally, major Wall Street institutions like Goldman Sachs, Morgan Stanley, and Citigroup have also implemented substantial workforce reductions.
Bank of America reveals that Americans with six-figure salaries are becoming unemployed at a rate three times higher than low-income workers. The stock market’s recovery in 2022 has been favorable for high earners, resulting in significant rebounds in their 401(k) accounts; a significant departure from the previous year. However, according to the Global Wealth Report compiled by Credit Suisse and UBS, the total number of American adults with assets amounting to $1 million decreased by 1.8 million to 22.7 million by the end of last year. The United States experienced the greatest decline in the number of millionaires worldwide, accounting for 38% of the total. Experts attribute this decline to the decrease in wealth caused by the NASDAQ’s 33% drop and the S&P’s 20% decline in 2022, affecting the growth of millionaires’ 401(k) and IRA accounts.
Furthermore, the recent economic challenges have impacted individuals across various income levels. The wealthiest individuals globally also experienced a decline in their fortunes in 2022, as the top 500 richest people collectively lost $1.4 trillion, according to data from the Bloomberg Billionaires Index. The number of six-figure earners receiving unemployment benefits saw a 70% increase in July, reflecting the broader economic difficulties.
These challenges can be attributed to various factors, including supply chain disruptions, the Russian invasion of Ukraine, China’s struggle to control COVID outbreaks, escalating levels of inflation, and declining stock markets. Anthony Shorrocks, one of the authors of the Global Wealth Report, highlighted that the decline in wealth in 2022 was largely influenced by high inflation and the appreciation of the US dollar against other currencies. Financial assets played a significant role in the decline, while non-financial assets, such as real estate, remained relatively resilient despite rising interest rates. However, Shorrocks noted that this situation may change in 2023 if house prices decline due to higher interest rates.
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