Bifurcated – Why the US consumer split could widen this year

A jobless expansion, the growing role of financial wealth, and the impact of fiscal policy will widen the bifurcation of the consumer this year. The no-hire, no-fire labor market is delivering stability for most workers, but the young and underemployed are finding it increasingly difficult to gain a foothold. Lower inflation will help ease pressure, but will struggle to move the needle much, particularly for lower-income households.

• The young and underemployed are finding it increasingly difficult to gain a foothold, holding back spending by younger and poorer consumers.
• Some prices of essentials are still rising sharply, and rising utility costs are offsetting falling gasoline prices.
• The boost to spending from the wealth effect is narrowly concentrated among older and richer households, especially travel, leisure and hospitality, and new vehicles.
• The bottom 80% of consumers are spending close to a record low share of their budget on discretionary items.