A worker paints over a Louis Vuitton storefront, boarded up after the coronavirus outbreak, on March 30 in San Francisco.
The wealthiest American households are keeping a tight grip on their purse strings even as their lower-income counterparts are spending a lot more freely when they emerge from weeks of lockdown. That decline in spending by the wealthy could limit the whole country’s economic recovery.
Researchers based at Harvard have been tracking spending patterns using credit card data. They found that people at the bottom of the income ladder are now spending nearly as much as they did before the coronavirus pandemic.
“When the stimulus checks went out, you see that spending by lower-income households went up a lot,” said Nathan Hendren, a Harvard economist and co-founder of the Opportunity Insights research team.
However, the wealthy are not matching them. “For higher-income individuals, that spending is still way far off from where it was prior to COVID and it has not recovered as much,” Hendren said.
That’s potentially crippling because consumer spending is a huge driver of economic activity. In fact, so much of the country’s economy depends on shopping by the top income bracket that the wealthiest 25% of Americans account for fully two-thirds of the total decline in spending since January.