Recession cutback city: Even the rich people are doing it!
Spending has stimulated the recent recessionary economy, and rich people have largely been the ones doing the spending. But now the New York Times reports that even the big spenders have roped in their purchases. The Federal Reserve has acknowledged that America’s economic recovery has slowed. If conditions worsen, experts believe that another stimulus may be necessary.
If rich people spend, jobs are created
Demand for goods and services creates the need for additional jobs, and spending – particularly that of the top 5 percent of U.S. income earners – indicates demand. That top 5 percent, which includes those earning $210,000 or more annually, accounts for “one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts,” according to Moody’s. As 60 percent of America’s economic fortunes depend upon consumer spending, that one-third is of super-sized significance. Gallup found that those earning $90,000 or more – their “upper income” classification – spent $145 per day in May 2010. That was up 33 percent more than May 2009. Unfortunately, the numbers for June 2010 were significantly lower, reports the Times. Rich people spent a mere $119 per day. Were they leaning upon bank loans more than was their custom?
Luxury businesses on the rocks
Early in 2010, luxury business showed strong numbers. As summer set in, reservations at hotels like the Four Seasons and Ritz Carlton fell. Sales at luxury retailers like Neiman Marcus and Saks Fifth Avenue slowed at about the same time. Rich people are spending less and buying less Real Estate in Manhattan and the Hamptons. Sure, those who aren’t rich are forced to be more frugal and use the occasional fast loan, but if rich people stop spending, it’s panic time.
Going where the Dow takes you
Considering their greater level of personal financial investment, rich people look at different indicators than the average person when it comes to evaluating the financial weather. The Dow Jones is a benchmark that means more to those who are extensively invested. When the numbers finally climbed back above 10,000 after being mired in the 7,000s months before, they psychological affect was palpable. Spending rose in all avenues, including car sales. Luxury vehicle dealers did well, but of late, some luxury auto dealers have enacted layoffs of 15 percent of more of sales staff. Even for those rich people who can still afford to spend, the psychological impact of looking like a glutton while the majority of the country pinches its pennies keeps them from spending more, according to studies by the Institute for Policy Studies in Washington.
What is the sign of economic apocalypse?
It could be that “apocalypse” casts too dark a pall, but consider this. Linda Stasiak, a high-end skin care product saleswoman, has found that the one single item that has experienced the top sales increase is the $15.95 tube wringer. It’s designed to squeeze each and every drop out of a tube – because today, even rich people are feeling the squeeze. Fast loans for tube squeezers, anyone?
Has the recession changed our perception of wealth?