The widening gap between the economic fortunes of the rich and the middle class is eroding faith in capitalism across the political spectrum. This sentiment is no longer confined to the left, as Republican pollsters find their own focus groups expressing deep skepticism of big business, mirroring progressive talking points and signaling a broad political realignment.
While headline unemployment remains low, a subtle weakening is occurring through "job downgrading." Workers, particularly in warehouse and retail, are not being laid off but are seeing their weekly hours cut from 40-50 to 30-35. This loss of hours and overtime pay erodes their income and bargaining power without being reflected in official unemployment statistics.
With the top 10% of earners accounting for half of all consumer spending, the U.S. economy has become dangerously top-heavy. This concentration creates systemic risk, as a stock market downturn or even a minor shift toward caution among this small group could trigger a sharp recession, with no offsetting demand from the rest of the population.
Unlike 2022, when stimulus savings allowed consumers to absorb price hikes, the financially depleted middle class now lacks the ability to pay more. This forces them to push back on price increases, creating significant consumer resistance that acts as a powerful, albeit painful, check on a new round of inflation from tariffs or other cost pressures.
The modern Chief Economist role at a large member-focused institution like Navy Federal is a "unicorn" position that extends beyond traditional forecasting. Two-thirds of the job is dedicated to education—both internally for its 24,000 employees and externally to establish thought leadership on middle-class financial health, a sharp contrast to Wall Street's focus.
Navy Federal's data reveals that middle-class spending on the low-cost e-commerce site TEMU has "nosedived." This shift away from even the cheapest online options indicates that this demographic has exhausted its excess savings and is now under significant financial pressure, forcing them to consolidate spending at retailers like Walmart and Costco.