Will the U.S. economy enter a “richcession” in 2023? And how bad will it be?
These are not the questions economists have been asking because they’ve been too busy worrying about a recession.
But this time, any downturn in the economy could really be different.
It could end up being a richcession, the trending term coined by Wall Street Journal reporter Justin Lahart earlier this week to describe a recession that disproportionately hurts rich people.
Typically recessions hurt poor people and the middle class the most, while the Musks, Bezoses and Zuckerbergs experience “an inconvenience.”
In fact, in the earliest days of the pandemic, the super-rich got richer, amassing more wealth as the health crisis worsened. Meanwhile, food banks were stretched thin from the unprecedented demand resulting from widespread layoffs.
Is there going to be a richcession?
Lahart argues that a richcession could be brewing because household wealth for those at the top didn’t grow as much as it did for those at the bottom, percentage-wise, over the course of the pandemic.
Wealth on the bottom grew as a result of stimulus checks and other government stimulus money as well as wage increases to try to keep up with inflation and attract workers in a historically-tight labor market. Wealth at the top, meanwhile, is stagnating because paychecks aren’t rising and the stock market’s decline over the past year is hitting the wealthier especially hard.
Lahart also points out that many of the layoffs that have made headlines are concentrated in tech, where workers often make six figures. For instance, the median worker at Meta earned close to $300,000 in 2021.
Working-class Americans, however, are in demand, albeit at much lower wages. That’s part of the reason why 223,000 new jobs were added last month, bringing the unemployment rate to historic lows.
This isn’t to say that a recession wouldn’t be painful for low-income Americans. Inevitably, if there’s a recession, they’re likely to be impacted by layoffs as well. For many that will mean losing their health insurance, dipping into retirement savings to stay afloat and having to turn to friends and family for help.