Morning Consult has released a new consumer sentiment survey, and the big takeaway is that people appear to have a much more positive outlook on the economy now than they have in the last few years. But if you look more closely at the data, you'll see that the gap between the opinions of high earners and low earners is widening.
In good times and bad, high earners always have a better sense of the economy than low earners, said Joanne Hsu, director of consumer surveys at the University of Michigan.
“People with higher incomes are simply better equipped to deal with downturns in the economy,” Hsu said.
What's interesting is that during such downturns, the sentiment gap between high and low earners narrows. And it has declined more in 2022 than ever before. That's because while inflation has had a greater impact on low-wage workers, it's made almost everyone feel kind of shitty.
But in the last year or so the gap has widened again. And it's based on the opinions of people who are better off.
“As times get better, we're seeing people with high incomes and higher levels of education become more optimistic about the future of the macroeconomics,” said Camelia Kuhnen, a professor of finance at the University of North Carolina, Chapel Hill.
She said this is largely due to stock market performance, which is broadly strong in 2023. The S&P 500 has been breaking records recently.
“So if I earn a high income, I probably have a job that comes with a 401(k). That’s irrelevant for low-income earners, right? Maybe they don’t have any equity ownership at all,” Kuhnen said.
The stock market is not the economy. And it's definitely not for people who don't participate.
Over the years, the sentiment gap fluctuated. But now it has become the Grand Canyon. And it can stay that way for a while.
“I think it begs the question: Is this a feature of the U.S. economy or is it a bug?” said John Leer, chief economist at Morning Consult.
The greater the differences in income distribution, the more likely the divided mood will be expressed, said Leer.
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