Frugality Of High Earners In U.S. Shows Long Shadow Of Recession

Sinking Sentiment

Sentiment among Americans earning more than $100,000 has fallen 15.1 points from a nearly eight-year high in mid-April, which is more than double the 7-point drop for all income groups, according to the Bloomberg Consumer Comfort Index.

Many HENRYs have a middle-class mindset, particularly if they live in urban areas, said Ron Kurtz, president of the American Affluence Research Center, an Atlanta-based company that focuses on the wealthiest 10 percent of U.S. consumers. With most of their paychecks funding everyday expenses -- principally housing -- this leaves less money for discretionary purchases, he said.

This group hasn’t enjoyed net-worth gains like their wealthier peers because many don’t have as much money invested in stocks, Kurtz said. As a result, “it’s unrealistic for luxury retailers to depend on these consumers as steady buyers on a year-to-year basis,” especially as post-recession volatility has encouraged more saving, he said.

Savings Rate

Americans who earn about $100,000-$250,000 a year saved 8.5 percent of their disposable personal income in the fourth quarter, according to Zandi’s calculations based on Fed financial accounts figures. That’s higher than the 7 percent average for all consumers, though it’s consistent with broader trends, he said.

Even so, there are signs spending may pick up. Average daily expenditures among Americans with household incomes of $90,000 or more rose 3.9 percent in April to $160 from a year earlier, according to Gallup Inc. in Washington. May figures are scheduled for release Monday.

This measure of self-reported spending has been “gradually edging its way up” after falling to less than $100 a day in 2010, said Frank Newport, Gallup’s editor-in-chief. “The overall trend is positive.”

Zandi expects spending will accelerate once there are “more substantive” gains in wages. Year-over-year increases in average hourly earnings have remained at about 2 percent since June 2009, Labor Department figures show.

Conspicuous Consumption

As people feel comfortable flaunting big-ticket purchases again, this could spur spending among their neighbors, Zandi said. There’s been a “general cultural shift” away from displays of conspicuous consumption, but some Americans will revert to old habits of “trying to keep up with the Joneses.”

Still, the longer a trend persists, the more likely such behavior becomes habituated, Danziger said. Consumer spending makes up about 70 percent of U.S. gross domestic product, so continued prudence among HENRYs is problematic, she said.

“We’re at a real tipping point,” Danziger said. “The affluent who have spending power are really not spending.”