"The rich get richer" is a time-honored cliché embraced by the have-nots of America’s economy, particularly during down cycles.
But is it any better for those people if the rich get poorer during a recession? According to Wall Street Journal reporter Justin Lahar, we are about to find out. Lahart recently coined "richsession" to describe the unusual state of the current United States economy, which has paired a historically low unemployment rate with widespread layoffs, particularly in the well-paying, skilled tech industry.
Lahart points out that, thanks in part to several rounds of government relief during the Pandemic and a tight job market now, the financial picture for many poorer people has even improved since the spring of 2020. Writes Lahart, "Federal Reserve figures show that the net worth of households in the bottom fifth by income was 42% higher in the third quarter than at the end of 2019, and up 17% from the end of 2021. A wage tracker developed by the Federal Reserve Bank of Atlanta shows that the 12-month moving average of annualized monthly wage growth for workers in the bottom quartile by income was 7.4% as of November."
"Wealth at the top," writes Elisabeth Buchwald in her recent USA Today article, "… is stagnating because paychecks aren’t rising and the stock markets decline over the past year is hitting the wealthier especially hard."
But as she points out, that's hardly a reason for those with lower-paying jobs to rejoice. Layoffs could still be part of this rich session, meaning a loss of health insurance, biting into retirement savings and even turning to friends and family to stay afloat.
"So whether its a recession or a richcession," she advises, "It’s worth taking the time now to prepare."