Economic outlook: The young and the rich are the most confident in the economy, according to report

For the first time in three months, consumer confidence in the economy increased, according to the Conference Board’s monthly report. Two paradoxical groups emerged with the highest levels of trust: one that is prone to becoming insulated from economic anxieties. And a second that is usually the model for them.

Both wealthy people earning more than $100,000 a year and young people, defined as those under 35, had the highest degrees of consumer confidence, based on the six-month average. The rise in confidence among wealthier households can be explained by a booming stock market, said Conference Board chief economist Stephanie Guichard. Fortune. While high levels of consumer confidence are common among young people, the Conference Board survey has taken on renewed importance as consumers across the country have taken a largely negative view of the economy in recent months.

Even after the Conference Board’s rebound in Tuesday’s report, overall consumer confidence is at one of the lowest levels since 2021. And yet by many measures the economy is in good shape, certainly better than during the pandemic-induced decline from 2021 to 2022. Inflation is down from June 2022 highs. The unemployment rate did not spike as usual when the Federal Reserve takes steps to reduce inflation. And within the labor market, wages remain relatively high.

Consumers may acknowledge that things are better than during the pandemic, but they still struggle to see meaningful progress in the cost-of-living struggles that plague their daily lives. Inflation is down, but not back to manageable levels, as grocery store prices still shock customers. Mortgage rates have become prohibitively high (reaching 7% last month), making homeownership out of reach for many.

According to Guichard, the increase in confidence of the rich is due to the stock market. “In April, the stock market fell and we saw high-income confidence drop,” Guichard said. “This month the stock market recovered and we saw a strong rebound in consumer confidence.”

Wealthier people tend to have more money invested in market-based investments and instruments, meaning that any changes in stock prices can have a major effect on their personal finances. Earlier this year, a report found that the richest 10% of households owned 93% of stocks and mutual funds.

If the explanation for why the confidence levels of the rich grew was clearly identifiable, the reason why the young did so remains a mystery. Data provided by Guichard shows that this has been the case since May 2023. And in an interview, Guichard said that, except for “very rare occasions,” it has been this way since 1996.

But those findings seem to run counter to other research. A report from consulting firm Deloitte found that the top concern for both Generation Z and millennials was the current cost of living. Both cohorts had little confidence that any further economic challenges would improve. Only 32% of Generation Z said they expected “the overall economic situation to improve,” while 31% of millennials said the same, according to Deloitte research. Some millennials faced such profound levels of economic uncertainty that it was making them depressed. Even those who handled the situation calmly were left feeling that the American dream—hard work rewarded with a life of financial security—had been a false promise.

For Guichard, the exact reason why some under 35s have so much confidence in the economy is not clear. Other research points to some possibilities. One explanation is that millennials tend to feel better about their finances when they receive financial help from their parents. Millennials will also benefit from the large transfer of wealth, where their boomer parents will leave them sizable inheritances. Both would give young people an immediate influx of cash, but it is hardly a replicable economic trend.

Another explanation is that the labor market remains strong. The unemployment rate is only 3.9% and for years there have been more jobs available than workers to fill them. All of this means that even young workers, in the early stages of their careers, feel they can make a modicum of career advancement. If any of the promising data on the labor market deteriorated, then young people could begin to become discouraged in the economy, Guichard says.

According to the project of some economists, this will happen at the end of this year and could disappoint even seemingly always confident young consumers.

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