This generation is currently faced with higher wages and high inflation; 2022 stocks are down; consumers splurge despite recession warnings; Despite promising signals, the economy stinks for practically everyone—even Cardi B, who argues with Janet Yellen about the reality of a recession.
In 2021, President Joe Biden seemed to have nailed the economic rebound code after the coronavirus slump. A third wave of stimulus checks boosted Americans’ savings to $4.2 trillion and led to record-low unemployment rates. Average of 4 million workers left each month for better-paying jobs. With stimulus money and increased wages, Americans went on a buying binge, triggering the largest economic expansion since 1984.
In 2022, customers are still waiting for the couch they bought months ago due to a supply bottleneck caused by Chinese lockdowns and the Russia-Ukraine war. Inflation keeps striking new 40-year highs, as Friday’s CPI shows.
In this chaotic economy, there are still winners. Perhaps you qualify. Despite the economy surpassing predictions, consumer morale dipped to a decade low last month. But Americans say they’re doing well. “Optimism gap” has confused economists for decades. As inflation and a recession loom, confidence may diminish. Cardi B has a point about Yellen’s economic experience.
Inflation eats up some Great Resignation raises, leaving many Americans with less than before. Inflation increased to 8.6% this week, so it’s not going away soon. The Fed is hiking rates to cool things down, but that’s causing recession fears. Two groups are beating high prices and the downturn. The economy favors homeowners and job-hoppers. The two major epidemic booms have been housing and jobs.
After abandoning tight city apartments for the suburbs, remote workers drove up home costs, causing a “savagely sick” housing market, according to Housingwire’s Logan Mohtashami. Homeowners now have roughly $10 trillion in equity. By last year’s end, 42% of homeowners had equity (their debts were half or less of their home worth), compared to 30% by 2020.
Workers who joined the Great Resignation are also rich if they received wage raises above the 40-year inflation mark. Erik Lundh, chief economist of the Conference Board, told Fortune in January that pay growth will remain robust this year. “It’s staying”
Nearly a third of U.S. office workers who started a new job during the pandemic are earning more than 30% more. Costco, Amazon, and Target upped minimum pay in the past year, helping the working class. Gen Zers are cashing in on record job vacancies, especially entry-level positions. The skill scarcity has made fresh grads more choosy and demanding when choosing a job.
Those who own their own homes and frequently change jobs are gaining ground in the economy.
The overheated economy isn’t so hot for the rest of America. Ask hopeful homebuyers attempting to buy a home when 96% of regional housing markets are overvalued, according to Moody’s Analytics. The dream of middle-class homeownership is dead due to rising property costs.
Rents account for 40% of May’s CPI. It’s especially awful for New Yorkers, who needs $160,000 to afford median one-bedroom rent. Lower-income households feel inflation more since they spend more on necessities. Both Kohl’s and Walmart reported that customers were migrating to cheaper alternatives or skipping transactions. Single mother Tanya Barham of Portland, Ore., canceled her streaming subscriptions to offset rising food costs. “We’re not lavish,” Barham told Fortune in May that they’re middle class. Inflation has caused her and others to rethink their finances.
Inflation has made Americans worth less than they were six months ago. According to the Federal Reserve’s latest report on the Financial Accounts of the United States, household net worth declined by $500 billion from January to March. Without home-owning winners, the wealth decrease would have been worse.
It’s bad news for everyone, but especially the wealthy. The world’s 500 richest people lost $1 trillion in May as bitcoin and stocks fell. Even retirees with large accounts are seeing inflation erode their investments, pushing some to return to work. The wealthiest still spend despite inflation.