You may have heard that consumer confidence has surged since Donald Trump’s November election victory, and maybe even that it's deeply divided along party lines. But the gaps in sentiment by income, employment and race are just as telling -- and could help explain the recent tepid gains in household spending.
Since the election, the difference in sentiment between Americans earning more than $100,000 and those with incomes below $15,000 has reached its widest since the recession ended in 2009, according to data from the Bloomberg Consumer Comfort Index.
During the depths of the financial crisis, the gap between the two groups was as small as 11 points. In late February, it hit 56 points, as economists including Thomas Piketty find that income gains since the recession have concentrated among the wealthy. Put another way, the poorest Americans are less confident today than the wealthiest Americans were at the nadir of the recession.
Typically, consumer confidence and spending share a loose link, but in recent months even that connection has weakened, leaving analysts scratching their heads. The rise in consumer confidence may be more attributable to a jump in the stock market, rather than in disposable income, according to Harm Bandholz, chief U.S. economist at UniCredit Bank AG. Wealthy Americans, who own equities and other financial products, have seen substantial gains in assets recent months, while many Americans have not.
Another major divide is in employment. The confidence gap between employed and non-working Americans is at a record high in data going back to 1990 from the Consumer Comfort Index.
Sentiment among part-time and unemployed consumers hasn’t recovered to pre-recession highs, yet among full-time workers it’s the strongest since 2001, just as the Internet bubble was bursting. This all comes at a time when more Americans of prime working age are outside the labor force than during any economic expansion since the 1980s, which means that income gains go to a smaller swath of people.
“Wage gains are accelerating, job security is increasing," Bandholz said. “That is all good -- if you have a job. But if you don’t, you are outside the labor market and it’s tough for you to get back."
The broader gain in confidence is also uneven when looking along racial lines. While sentiment for black consumers typically runs slightly behind whites, since Trump's election the gap has widened substantially, Consumer Comfort figures show. White confidence is now matching the strongest level in 15 years, while black sentiment recently sank to the lowest since 2014.