Cutting into Consumer Spending
High earners drive the economy. Across earnings calls and consumer spending statistics, the reality emerges that while a large share of Americans are tightening their belts, wealthy individuals are still spending, and this spending is fueling economic growth. 49.7% of consumer spending comes from the top 10% of earners —they consume nearly five times their proportion of the population (Ensign, 2025). While this has enabled resilient consumer spending amid a weakening labor market, this increased reliance on higher earners also leaves the economy exposed to greater exposure in consumer spending based on factors like stock market returns.
Historically, those at the top have held an outsized role in consumer spending, but that share has grown at an accelerated rate in recent years. The 49.7% figure for the top 10% in 2025 is up significantly from 36% thirty years ago. Wage growth for high earners, which has outpaced other groups, could be one culprit (Rugaber, 2025). Another explanation could be the booming equity markets. Fortune reports that a 1% jump in wealth held in stocks results in a 0.05% boost in consumer spending (Ma, 2025). Considering broad market indices are up double digits thus far in just 2025, the potential for the market’s effect on Gross Domestic Product (GDP) can become quite pronounced —after all, roughly 70% of GDP consists of consumer spending.
Consequently, it is unsurprising that those with significant holdings in the stock market have more positive sentiments about the economy than those who don’t (Ensign & Wolfe, 2025). On the other end, many consumers with lower and middle incomes are reducing their spending, and it is showing up in earnings calls. From McDonald’s to Coca-Cola, consumer-facing retail brands are noting a K-shaped economy, involving a widening gap between higher- and lower-income consumption (Wile & Chiwaya, 2025). Unfortunately, clear labor market data publication, particularly relevant for understanding middle- and lower-income household health, was affected by the government shutdown. However, in his most recent public comments, Federal Reserve Chair Jerome Powell expressed concern about a softening labor market (Transcript of Chair Powell’s Press Conference October 29, 2025, 2025, 1-2).
From a lawmaker's perspective, the bifurcated economy creates an incentive in Washington to keep the equity market party going. If the people at the top driving growth no longer feel enthusiastic about the economy and begin to alter their consumption patterns in response, lower- and middle-income families will be the ones who suffer the most, since, afterall, it is high-wage earners’ consumption keeping afloat the businesses that employ lower- and middle-income earners. U.S. President Donald Trump appears to understand the importance of investor faith in the stock market and has consistently expressed his focus on markets, with Truth Social posts such as “THE STOCK MARKET IS STRONGER THAN EVER BEFORE BECAUSE OF TARIFFS”(Trump) attempting to manage investor sentiment despite a generally negatively received tariff policy.
Despite Trump’s enthusiasm, in recent months, even OpenAI Chief Executive Officer Sam Altman admitted to believing that investors are “overexcited” about A.I. (Allyn, 2025). Technology companies such as Nvidia boast lofty valuations based on similarly lofty expectations for A.I.-fueled future business and spend big with expectations of huge payoffs. With A.I. bubble talk becoming more pronounced after the release of columnist Andrew Ross Sorkin’s 1929, the risk of a market drawdown appears very real. If there is an A.I. bubble, and investors suffer major losses in a correction or crash, the impact on consumer spending, and thus the economy, would pose a serious risk. While those outside the top 10% may own little stock, they are the ones whose jobs rely on the spending stock market gains fuel. In other words, if the market crashes, consumer spending, and consequently the labor market, will likely be hit hard, too.
Ultimately, the current moment involves an economy hinged more than ever on a small subsection of Americans. Limited access to labor market data on account of the ongoing government shutdown limits information about how more economically-vulnerable groups are faring. Nevertheless, one reality remains clear: High-income consumers who own stocks feel good about them and, in turn, feel good about spending more. Should that change, they may no longer support the U.S. economy the way they have in the last several years.
Edited by Ethan Jacobs
References
Allyn, B. (2025). What concerns are there about an AI bubble? NPR. Retrieved December 6, 2025, from https://www.npr.org/2025/11/23/nx-s1-5615410/ai-bubble-nvidia-openai-revenue-bust-data-centers
Donald Trump. (2025). THE STOCK MARKET IS STRONGER THAN EVER BEFORE BECAUSE OF TARIFFS! [Truth Social Post]. https://truthsocial.com/@realDonaldTrump/115428915165145135
Ensign, R. L. (2025). The U.S. Economy Depends More Than Ever on Rich People. The Wall Street Journal. https://www.wsj.com/economy/consumers/us-economy-strength-rich-spending-2c34a571?gaa_at=eafs&gaa_n=AWEtsqct4F0qeY9dkjKo8RrqSyUK4rhY6OiM8EmbZ8PPljKqN7ADby2OLDinWLNetNA%3D&gaa_ts=6912bf36&gaa_sig=QQLJXfYvnHATeZYjaDHMoHWQo_uQkx_TVVdAZOmarrUfVv8Wcgt_0NIZw2jhPOT
Ensign, R. L., & Wolfe, R. (2025). Feeling Great About the Economy? You Must Own Stocks. https://www.wsj.com/economy/consumers/economy-sentiment-stock-market-investors-2eb1e772?mod=Searchresults&pos=1&page=1
Ma, J. (2025). It’s getting harder to separate the stock market from the economy. That means the Fed and Congress have more incentive to help Wall Street. Fortune. https://fortune.com/2025/11/02/stock-market-wealth-effect-economic-growth-consumer-spending/
Rugaber, C. (2025). Here's why everyone's talking about a 'K-shaped' economy. ABC News. Retrieved December 6, 2025, from https://abcnews.go.com/Business/wireStory/everyones-talking-shaped-economy-127993867
Transcript of Chair Powell’s Press Conference October 29, 2025. (2025). Federal Reserve. https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20251029.pdf
Wile, R., & Chiwaya, N. (2025). From fast food to beverage giants, brands see rising income inequality among customers. NBC News. Retrieved December 5, 2025, from https://www.nbcnews.com/business/economy/mcdonalds-cocacola-chipotle-economy-rcna241168
Kelly, S. (2025). Why has America’s economy gone K-shaped? [Photograph]. The Week. https://theweek.com/business/economy/american-economy-k-shaped-wealth-inequality