Those pernicious rumors of a “richcession" weren’t necessarily overstated. While Washington and New York’s top power brokers soak up rays from the sundecks of their second homes, some of their well-heeled peers are feeling a chill. Consumers making more than $125,000 — a cohort that Bank of America economists consider “higher-income” — are joining the unemployment rolls at more than three times the rate of those with low or moderate incomes, according to the bank’s deposit data. Wage growth among wealthier households also deteriorated much more quickly over the last year and a half; a trend that continued even after Wall Street’s disappointing bonus season concluded, according to BofA. High-paying industries like tech and financial services have been laying off workers even as other industries grappled with a dearth of workers, BofA Institute economist Anna Zhou told your host. That’s one reason why — at least until recently — top earners were more pessimistic about the economy than consumers with smaller incomes. “When you think about the lower end of the income spectrum, it's people who work at retail stores, or hospitality, and in fact there's still a little bit of labor shortage on that front,” she said. “That explains why wages are holding up well and unemployment numbers are fairly low [in those sectors].” That’s a point of pride for the Biden administration. In a speech on Monday commemorating the one-year anniversary of the Inflation Reduction Act, Treasury Secretary Janet Yellen told a Las Vegas crowd that wage gains are now outpacing inflation and that in a majority of major economic sectors, real wages are growing faster than they were before the pandemic. “This has had a sizable impact on reducing inequality,” Yellen said. The declines experienced by higher-income households aren’t particularly widespread, Zhou noted. The unemployment rate is still near historic lows, after all, and the monthly jobless claims reported by the Labor Department are still “very healthy” compared to historical levels, she said. What’s more, the financial cushions that households amassed during the pandemic are still in decent shape, Zhou added. Like the Federal Reserve, Bank of America economists no longer anticipate a recession. Even though there are some cracks on the higher end of the income spectrum, deposits for those customers are “resilient,” Zhou said. “Even if we continue to see deterioration in the labor market, the buffer [consumers] have will continue to make the slowdown more gradual.” IT’S TUESDAY — Send tips, gossip and suggestions to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com
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