The Rich Flex Their Muscles

America’s upper class has begun to return to the free spending ways that characterized their behavior prior to the recession. This may be because the percentage of people unemployed among the well-to-due lagged the national average. It also may be that BMW, Tiffany, and Ritz Carlton have offered bargains to get old customers back.A recent Gallup poll shows that “Upper-income Americans’ self-reported spending rose 33% to an average of $145 per day in May — up from $109 per day in April 2010 and May 2009, and the highest monthly average since November 2008.”

Upper-class respondents were those with household incomes over $90,000. The data was collected by telephone interviews conducted as part of Gallup Daily tracking May 1-31, 2010, with a random sample of 14,303 adults.

Spending among lower and middle-class adults did not move up at all.

The news might seem to be good for the economy, but probably isn’t. The upper class accounts for a very small percentage of overall households. The parts of the economy which represent most of consumer spending are retail, autos, homes, and consumer electronics and appliances. Even the wealthy do not need more than two cars and four or five televisions. There is a great deal of evidence that even the middle class has not given up buying PS3s and Xboxs. A real recovery will occur when middle class consumers start to spend aggressively across a wide range of goods and services. That buying may be far off as unemployment and underemployment still hover around 17%.

Whatever liquidity has been pumped into the market and whatever wages have been earned over the last two years are still going as much into savings as consumer spending. Research of consumer attitudes still often shows that when economists say the recession is over, the average citizen does not.

The consumer spending recovery is a long way off. People are still worried about their homes, their retirements, and their children’s education. Those attitudes will take years to change.

Douglas A. McIntyre