If you feel like the economy isn\u2019t working for you, that\u2019s because it probably isn\u2019t. According to the latest analysis from Moody\u2019s, the bottom 80% of earners have merely spent in line with inflation since the pandemic\u2014it\u2019s the top 20% which are driving the growth. <\/p>\n
Moody\u2019s chief economist Mark Zandi wrote the rating\u2019s agency had updated its spending by income group data for Q2<\/a> 2025, based on the Federal Reserve\u2019s survey of consumer finance and financial accounts update.<\/p>\n Zandi\u2019s analysis found the gap between very high earners, and low and middle-income earners, is increasingly diverging\u2014especially since the last quarter of 2022. <\/p>\n \u201cLooking at the data, it\u2019s not a mystery why most Americans feel like the economy isn\u2019t working for them,\u201d Zandi wrote. \u201cFor those in the bottom 80% of the income distribution, those making less than approximately $175,000 a year, their spending has simply kept pace with inflation since the pandemic.\u201d<\/p>\n \u201cThe 20% of households that make more have done much better, and those in the top 3.3% of the distribution have done much, much, much better.\u201d <\/p>\n Working from a basis point of 100 (equivalent to spending levels in Q4 of 1999), Zandi\u2019s work shows the top U.S. earners\u2014those in the 96.6% to 100% category\u2014have increased their spending to around 170 basis points. <\/p>\n Conversely, low and middle-income earners have increased their spending to around 120 basis points. That being said, the Consumer Price Index has followed an almost identical trajectory from Q420 to the most recent figures, meaning spending is merely in line with inflation. <\/p>\n This means, therefore, that any bottom-line growth to spending is coming from a very narrow group of people, meaning the prospects of the economy are \u201ctethered\u201d to the income and confidence among the nation\u2019s wealthiest. <\/p>\n \u201cThe data also show that the U.S. economy is being largely powered by the well-to-do,\u201d Zandi noted.\u00a0\u201cAs long as they keep spending, the economy should avoid recession, but if they turn more cautious, for whatever reason, the economy has a big problem.\u201d <\/p>\n The rich get richer<\/p>\n The health of the economy hinging on a minority may be a concern, but that worry is offset by the fact that the richest percentiles aren\u2019t going to run out of cash to splash anytime soon.<\/p>\n According to the Fed\u2019s distribution of wealth barometer<\/a>, it is the rich who are getting significantly richer, and faster. For example, in Q1 2025 the bottom 50% percentile of the wealth ladder owned assets worth $4 trillion. That\u2019s up from the start of last year, when their assets sat at $3.84 trillion.<\/p>\n Higher up the ladder, the wealth of the top 50% to 90% sat at $48.49 trillion in Q125, up from $47.02 trillion in the same quarter last year.<\/p>\n But it is in the top 10% where the wealth is really weighted: The 90% to 99% wealth cohort had assets totaling $58.38 trillion in the first quarter of this year, the top 99% to 99.9% owned $27.2 trillion, and the top 0.1% owned $22.19 trillion\u2014more than five times the assets held by the bottom half of the wealth ladder combined.<\/p>\n And their wealth is also steadily growing: In Q1 2024 the 90% to 99% cohort owned $56.37 trillion in assets, the 99% to 99.9% owned $26.03 trillion and the top 0.1% owned $21.19 trillion.<\/p>\n But across the income spectrum, retail sales data shows consumers show no sign of slowing even as economic headwinds pile up. Weaker employment data and inflation also ticking up slightly higher might have concerned economists that consumers would pull back. Not so. The Commerce Department reported Tuesday that retail sales grew 0.6% in August, beating expectations, with core retail rales rising 0.7% and July staying unrevised at 0.5%.<\/p>\n The data<\/a> was reassuring for economists. Tuan Nguyen, a U.S. Economist at RSM US<\/a>, wrote in a note seen by Fortune: \u201cThe data reflected a strong back-to-school season, even as job growth revealed unexpected weakness in recent months.\u00a0It\u2019s the same old saying: Americans won\u2019t stop\u00a0spending\u00a0until they can\u2019t. While the labor market has softened, income growth and household balance sheets remain solid, supporting continued consumer demand.\u201d <\/p>\n Nguyen did offer a note of caution\u2014one which the Fed will also be mindful of at its meeting this week\u2014which is that a sharp rise in spending over the past three months was driven by higher prices. Nguyen notes that inflation \u201clikely accounted for as much as half of the gain.\u201d <\/p>\n The expert added: \u201cWe also suspect that the recent spike in demand reflects another round of front-running tariffs, which could trigger a sharp pullback in September and October once tariff concerns resurface.\u00a0The waters look calm for now, but we\u2019re not at shore yet.\u201d\n<\/p>\n