The percentage of upper-income Americans (those having annual incomes of $90,000 or more) saying the U.S. economy is "getting worse" increased to 55% in June -- approaching the 59% of one year ago. At the same time, 41% say the economy is "getting better" -- also close to the 37% of June 2011. This deterioration in upper-income confidence about the future of the U.S. economy appears to be another sign that this year's economy may be following a pattern similar to last year.
Upper-income Americans were even more optimistic in early 2012 than in early 2011. From February to May, the percentage of upper-income Americans saying the economy is "getting better" essentially matched the percentage saying it is "getting worse." However, by June the spread between these measures had increased to 14 percentage points.
In June 2012, the percentage of lower- and middle-income Americans (making less than $90,000 a year) saying the economy is "getting worse" is at 56% and the 39% saying it is "getting better" essentially matched the ratings provided by upper-income consumers. Lower- and middle-income Americans are generally less optimistic than upper-income Americans and that was the case for most of the past 18 months. The exception took place during August through October 2011 when the federal budget ceiling confrontation brought concerns about the economy "getting worse" back up to the 75% to 80% recession range.
Upper-income Americans' confidence is important, because these are the consumers who have the disposable income available to spend. When these consumers pull back, the economy tends to slow.
The danger now appears to be that upper-income consumers and the U.S. economy will repeat the swoon of one year ago. Last year, the economy slowed and approached recession as Washington was unable to get its act together concerning the federal budget ceiling. This year, the inability of Europe to deal with its financial issues and the slowdown in China are creating major concerns about a global recession. Add in the U.S. presidential election, the intensifying political battles over the Bush-era tax cuts, and the so-called fiscal cliff, and the U.S. economy could easily repeat last year's economic stall -- but this time it could last until November.