It’s always been true that those who are better off have a more sanguine view of the economy. In the last year, though, that gap has become especially glaring. For households with income of more than $50,000 a year, confidence is up to the levels of 2007. For those below that, it’s not even close. Take a look at the chart below, which charts the Conference Board’s Consumer Confidence Index by income group since 2006.
Three things are worth pointing out here. One is that median household income in the U.S. has hovered a little above $50,000 ($52,100 now) for several years, so just about half of households end up below the $50,000 mark. The second is the surge in confidence among those in the upper half in the last year. For that group, the index now stands at 110.7, above where it was in 2007.*
The third point to notice is that those who have recovered least are not those at the bottom. It’s those in the lower part of the middle class. Look carefully at the green line, marking households that earn $35,000 to $50,000 a year. For that group, the Conference Board’s confidence index is now just 64.6. That’s a 46 point gap — by far the biggest divergence since the organization started tracking the $35,000 to $50,000 bracket back in 1989. People in this group have actually become more pessimistic since 2011, in what’s supposed to be an economic recovery.
This is where the political battles of the next few years are likely to be fought. There’s plentiful evidence that the recession has been especially hard on the poor. Yesterday alone Bloomberg published stories about subsidized housing in Atlanta and striking fast food workers. What’s more surprising is that the confidence gap is actually more severe a little way up the ladder. For a long time it was a cliché that much of the U.S. working class felt “middle class.” Now it appears that a big part of the middle class — those households in the $35,000 to $50,000 a year bracket — feels poor.
P.S: A hat tip to Bloomberg’s David Wilson and Neil Dutta of Renaissance Macro Research LLC. Wilson’s story on the Bloomberg professional terminal draws attention to Dutta’s work tracking the confidence gap. Also worth noting: Josh Brown at The Reformed Broker today says that confidence surveys make for terrible forecasts. True! They don’t tell you where the economy is headed. But they do tell you a lot about whether folks are happy with where it is.
Update: A lot of comments on this post, raising the question whether incomes $35,000 to $50,000 a year count as middle class at all. Addressing that merits a follow-up post, here.
*For those with incomes above $125,000 the index has risen much higher, to 142.3. I don’t include those numbers because the Conference Board breaks out that data starting only in late 2010.