A Tale Of Two Recoveries: Wealthy Rebounding While Lower-Income Families Struggle

While there may be a load of mansions and McMansions sitting empty or half-finished as a result of the economic collapse, don’t take that as a sign that the wealthy are bogged down in the same swamp as the rest of us. According to a study from our research-happy relatives at Consumer Reports, America’s well-to-do have been on the upswing for almost 18 months while lower-income families continue to feel the pinch.

Looking at the Consumer Reports Sentiment Index — a monthly measure of the economy from the consumer’s perspective — for the last two years, it looks like the economic recovery began in February 2010 for those households earning more than $100K per year. It was at that point that the index crossed over into positive territory for this income bracket representing about 18% of the country. The index recently reached a two-year high for this group.

The middle-income group — those households earning between $50K and $100K per year — required another 11 months before it crossed over into the positive side of the graph in Jan. 2011. These people are also recently recorded two-year high index scores.

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On the lower end of the scale are those households earning less than $50K per year. Since bottoming out in Oct. 2009, this group’s index has never crossed back into positive territory, nor has it recovered to pre-bust levels like the two other income groups.

“We are seeing a tale of two very different recoveries,” said Ed Farrell, a director of Survey Research at the Consumer Reports National Research Center. “While things have been improving for the wealthiest Americans for some time, lower-income families still have very little to be positive about.”

Flattened consumer sentiment among lower-income households is likely due to the fact that the financial troubles faced by these people has been more dire than those faced by the other groups.

According to Consumer Reports’ Trouble Tracker Index — a measure of eight financial troubles, including the ability to afford health care and make mortgage payments — shows that financial suffering among lower-income Americans has been three to five times the level of those earning $100,000 or more, over the course of the recession.

For example, while fewer than 5% of wealthy households reported having difficulty paying for medical coverage and prescription medication, that number has been as high as 25% for the lower-income group.

You can read more about the results of CR’s research at ConsumerReports.org.