Upper middle-class squeeze

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/articles/the-upper-middle-class-is-getti…

**The Upper Middle Class Is Getting Squeezed**
**The first two years of the pandemic were good for the group’s savings and investments, but 2022 isn’t**
**by Dion Rabouin, The Wall Street Journal, 7/25/2022**

**....**

**Upper-middle-class households are defined here as those earning between $75,301 and $127,300 a year, according to the Fed. They make more money than at least 60% of other households, but less money than the top 20% of earners....**

**Over the first three months of 2022, upper-middle-class families lost a bigger chunk of their stock portfolios than the people who make more than them, according to the Federal Reserve. Since the pandemic started, they saved less than most of the people who make less than them, according to Moody’s Analytics. The value of their liabilities grew by 2% in this year’s first quarter, more than any other group, as they took on greater debt for auto loans, credit cards and other consumer credit.....**

**Despite their relatively large salaries, upper-middle-income Americans have less in excess savings than all but the poorest U.S. households, both in aggregate and per household, according to Moody’s Analytics. (The poorest households are defined as those earning $28,400 or less a year.)...** [end quote]

The upper-middle class was excluded by income from many of the Covid benefits that went to lower-income groups. They tend to live in suburban homes with inflating insurance and long commutes where rising gas prices are a burden.

Consumer sentiment in the upper middle class and upper class has dropped over the past year until it’s not much higher than the lower income groups. The boost from the roaring 2021 stock market has vanished in 2022’s bear market.

The upper middle class has a Macro impact because they spend a lot of their income and they have more to spend than the lower income groups. A spending pullback of the upper middle class (a negative wealth effect from the bear market) could significantly slow the Macro economy.

Wendy

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Despite their relatively large salaries, upper-middle-income Americans have less in excess savings than all but the poorest U.S. households…

Is that on an absolute or percentage basis?

DB2

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Wendy,

The numbers are fascinating because of what the golfers tend to be saying about their golf games.

Since the beginning of the season all the guys at the local clubhouse when I ask how was your game, “I sucked out there today. Bad day. I should give up this game.”. Then of course they play the next day and say the same thing again. Might not even reframe it.

Usually, or in better times, the guys would say, “had a really good round today. The weather is good. Our foursome played fast”. Usually the stock market is up. I had not made the connection.

The other thing I did not know, upper middle class according to the FED is so low. The reason I did not know is coming from a medical family, when I was younger mom and dad were upper middle class. I did not realize with the rise of doctors’ pay all of them moved into the 20% upper class nominally. That has been that way for more than two decades. I am getting old.

I am middle class and save a lot. My investments do alright. In dollars for now I am safe enough. We just do not know what will happen to the major global financials.

I have the most potential earnings of anyone in my family. As an artist that is very unexpected. Between the potential of the NFTs later this year and now my video game development I have a lot of upside. I bought a domain from Google today for my game. I am studying C# to go into development using Microsoft’s platforms.

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DB2,

60% below them, 20% above them…

20% are upper middle class.

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DB2

Actually I am not sure what excess savings means.

I just save.

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< Despite their relatively large salaries, upper-middle-income Americans have less in excess savings than all but the poorest U.S. households…

Is that on an absolute or percentage basis?>

Absolute. It’s a chart that shows U.S. households’ excess savings, in billions of dollars, Amount of money saved above average levels for each income group from 1Q2020 to 1Q2022.

Despite their relatively large salaries, upper-middle-income Americans have less in excess savings than all but the poorest U.S. households, both in aggregate and per household, according to Moody’s Analytics. (The poorest households are defined as those earning $28,400 or less a year.) It shows the aggregate of the entire income class, which may be more useful for Macroeconomic analysis but not as useful as average per-household for understanding family situations.

Wendy

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Amount of money saved above average levels for each income group…

So, the graph is of savings above the average levels. If upper middle income households usually save more than poor households (which seems reasonable) then upper-middles could still have more saving going on than po’ folks, just not as much as usual.

Is that a correct interpretation?

DB2

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I don’t get wsj so I apologize if the article answers this question. How is age factored into the analysis and what does ‘excess savings’ mean?

I ask this because we had above average incomes and meager savings the first few decades of our marriage while we were raising our family, paying off mortgages and other bills, and saving.

Now we are retired, earning much less ‘income’ than before, but have much more excess savings to go with our reduced income. It seems that millions of baby boomers similarly situated could skew the numbers.

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<So, the graph is of savings above the average levels. If upper middle income households usually save more than poor households (which seems reasonable) then upper-middles could still have more saving going on than po’ folks, just not as much as usual.>

Upper-middles always have and still do have more excess savings than po’ folks (< $28,000). What is surprising is that the Upper-middles (the third quintile) now have less excess savings than the second quintile – the lower to middle ($28,000 - $75,000). During the pandemic, this tranche qualified for lots of government programs, including child care, enhanced unemployment and helicopter money, which the upper-middles made too much to get. And the upper-middles have more in the stock market, which has been hard hit by the Fed’s policies.

Wendy

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Upper-middles always have and still do have more excess savings than po’ folks (< $28,000). What is surprising is that the Upper-middles (the third quintile) now have less excess savings than the second quintile – the lower to middle ($28,000 - $75,000).

Wendy, what we’re trying to figure out (not having access to the article) is what “excess savings” are.

DB2