The Rich Still Aren’t Spending Like They Used To

Here’s a fascinating chart from the New York Times:

First of all, it’s interesting to see how fast spending plummeted: it declined by a third within the space of less than two weeks. That’s unreal.

Second, it shows how effective the UI bonus payments have been. These payments go to the unemployed, who are largely in the bottom half of the income spectrum, and those are the people whose spending rebounded most strongly.

Third, it suggests that the upper middle class is still spending way less than it used to. The article notes this, but finds it largely inexplicable. However, given that the top 25 percent are responsible for something like half of all spending, their reluctance to get back to normal is a big deal.

My own guess? Low-income workers cut back on necessities (rent, food, etc.) because that’s all they buy. When they got more money, they started buying that stuff again because they had to. Richer folks cut back mainly on luxuries (theater outings, expensive restaurant meals), and many of those things are still unavailable. More generally, their spending is still down because they mainly cut back on nonessential items in the first place and that means they can afford to wait a while before they get back to normal.

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