No. 8 Shopping: The Rich And The Rest

High-end retailers such as Ralph Lauren and Tiffany used to be pretty good indicators of where the economy was headed: when people make more luxury purchases, it’s a sign of financial confidence. Those two retailers and others like them have rebounded nicely from the recession, while midmarket stores like Gap are still mired. What’s going on?

Sales at top-tier retailers are now dominated by the wealthy, and the wealthy and the rest of us have been increasingly going our separate ways–a separation accelerated by the recession. The unemployment rate for people with a bachelor’s degree or higher is 4.3%, less than half what it is for the nation as a whole. And the incomes of the top 1% (those earning $380,000 or more) are nearly as high as they were before the recession. The result is that the wealthy are spending again.

According to Moody’s Analytics, the top 5% of earners in this country now account for 37% of the spending, up from 25% two decades ago. And while that’s enough to boost the fortunes of Tiffany and its ilk, it’s not enough to boost the entire economy. As a result, the rest of us are moving down-market, buying more at low-cost stores like Family Dollar, creating a bifurcated retail market that serves two diverging Americas: the have-a-lots and the have-a-littles.