In this economy, even the rich are struggling.
Americans making more than $125,000 a year are three times more likely to be laid off than low- and middle-income earners, according to a Bank of America study that used data on unemployment benefits deposited in customer accounts.
Bank of America noted in its report that “higher unemployment rates among higher-income earners” in July, noting that the number of six-figure earners receiving unemployment benefits rose 70% from a year ago.
“While low- and middle-income households remain fairly resilient, higher-income households appear to be taking a bigger hit from the labor market,” the Bank of America report said.
Industries that offer high-paying jobs, such as technology and finance, have been shedding jobs over the past few months.
Silicon Valley companies including Meta, Amazon, and Alphabet have laid off more than 227,000 people since the beginning of this year, according to Layoffs.fyi.
Meanwhile, major Wall Street firms such as Goldman Sachs, Morgan Stanley and Citigroup have laid off thousands of employees.
As the stock market recovers starting in 2022, the 401(k)s of high-income earners have seen a significant recovery that is very different from where it was a year ago.
The number of U.S. adults with a combined net worth of more than $1 million at the end of last year fell by 1.8 million to 22.7 million, according to the Global Wealth Report compiled by analysts at Credit Suisse and UBS.
The United States, which has the highest concentration of billionaires (38% of the world total), saw the steepest decline in the number of people with wealth in at least seven figures last year.
“The 33% drop in the Nasdaq and 20% drop in the S&P in 2022 has created a big drop-off among millionaires who had seen significant growth in their 401(k) plans and IRAs over the past few years,” Ted Jenkin, co-founder of Exit Stage Left Advisors, an Atlanta-based exit planning consultancy, told The Washington Post.
The economic turmoil is hitting many of the country's top earners hard.
The super-rich also felt the pinch.
The 500 richest people on the planet lost a combined $1.4 trillion in 2022, according to figures from the Bloomberg Billionaires Index.
A combination of supply chain disruptions, Russia's invasion of Ukraine, China's inability to recover from the coronavirus pandemic, soaring inflation and plummeting stock prices have hit the net worth of the country's wealthiest individuals.
“Much of the decline in wealth in 2022 was driven by high inflation and the appreciation of the US dollar against many other currencies,” said Anthony Shorrocks, one of the authors of the Global Wealth Report.
“Similarly, financial assets contributed most to the decline in wealth, while non-financial assets (mainly real estate) remained strong despite the sharp rise in interest rates.”
“However, if house prices fall in response to rising interest rates, the relative contributions of financial and non-financial assets could reverse in 2023,” Shorrocks added.
