Across the economy, median wages jumped 6% in April from a year earlier, according to the Federal Reserve Bank of Atlanta. But even though that was the largest increase since 1990, it was still below the inflation rate of 8.3%.
The deep divide in spending was reflected in the latest round of quarterly earnings for retailers. At the high end of the spectrum, Nordstrom and Ralph Lauren reported stronger-than-expected sales as their well-heeled shoppers returned to pre-pandemic routines. Lululemon also reported strong quarterly sales of its pricey athletic wear.
“We are now in a new chapter where high inflation is greatly limiting the ability of consumers to make discretionary purchases, especially of high ticket items," Big Lots CEO and President Bruce K. Thorn told analysts late last month. “We know that many Americans now are once again living paycheck-to-paycheck."
The spending mood has shifted from last October and November, when the Fed conducted a survey and found that almost eight in 10 adults were either “doing okay or living comfortably” when it came to their finances in 2021, the highest proportion to say so since the survey began in 2013. For those earning less than $25,000, the proportion that said they were doing at least okay jumped to 53% from 40%.
Meanwhile, the poorest one-fifth of Americans have exhausted the savings they'd built up during the pandemic in part through stimulus checks, child tax credit payments and higher wages, according to calculations by Jeffries, an investment bank. Americans’ bank accounts. The other four-fifths of U.S. households are still sitting on a large stockpile of additional savings since the pandemic, with much of that held by the top fifth.
The current environment is making it difficult for retailers to pass on higher costs. Macy's, for instance, got pushback after raising prices on some casual clothing items and home accessories.
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