High-Income Americans Are Losing Confidence: What's Worrying the Wealthy

Consumer sentiment in America remains near historic lows, but a new trend buried in the data should concern economists and business leaders alike: high-income Americans are losing confidence at an alarming rate. According to recent survey data, households earning more than $100,000 annually have seen the sharpest decline in economic outlook—a potential red flag for the white-collar job market and discretionary spending.

The Surprising Sentiment Split

The University of Michigan's consumer sentiment survey has long tracked how Americans feel about the economy. The headline number—currently at 54, near all-time lows—has been well-publicized. What's received less attention is the divergence between income groups.

In the January preliminary survey, sentiment among lower-income consumers actually improved modestly. But among households earning more than $100,000, confidence declined significantly, marking a reversal from patterns seen during most of 2025.

"This is a notable shift," said Joanne Hsu, director of the University of Michigan Surveys of Consumers. "For most of last year, high-income households were relatively insulated from the pessimism affecting lower-income Americans. That's no longer the case."

The implications are significant. High-income consumers drive a disproportionate share of discretionary spending. When the wealthy pull back, it affects everything from luxury goods to travel to restaurant spending. Their reduced confidence could ripple through the economy in ways that lower-income pessimism does not.

What's Driving the Pessimism

Several factors appear to be weighing on high-income sentiment:

Job Market Concerns: While the overall unemployment rate remains low at 4.0%, white-collar job markets have softened considerably. Technology, finance, and professional services—sectors that employ many high earners—have seen significant layoff announcements. Meta, Citigroup, and other major employers have cut thousands of positions in recent months.

The New York Fed's latest consumer survey found that job-finding expectations have dropped to series lows, with the sharpest declines among college-educated workers. This suggests high-income professionals are increasingly worried about their own employment security.

Stock Market Volatility: Affluent Americans tend to have more exposure to financial markets through 401(k)s, IRAs, and taxable investment accounts. While the stock market has performed well overall, recent volatility—particularly the selloff in bank stocks and concerns about Fed independence—may be rattling investor confidence.

Housing Wealth Effects: Home values in many affluent areas have stagnated or declined after the rapid appreciation of 2020-2022. For homeowners who viewed their properties as retirement nest eggs, this plateau represents a psychological hit even if they have no immediate plans to sell.

Inflation Persistence: While headline inflation has declined from its 2022 peak, services inflation—which affects everything from dining out to professional services to healthcare—remains elevated. High-income households, who spend proportionally more on services, may be feeling this pinch more acutely than official inflation measures suggest.

The White-Collar Recession Risk

The concentration of pessimism among high earners raises the specter of what some economists are calling a "white-collar recession"—a downturn that primarily affects professional and managerial workers while blue-collar employment remains relatively stable.

This scenario has historical precedent. During the early 2000s tech bust, unemployment among college graduates rose faster than among those without degrees. A similar dynamic appears to be emerging today, with AI-driven automation and corporate restructuring disproportionately affecting knowledge workers.

"The jobs that are being cut aren't factory positions—they're analysts, managers, and marketing professionals," observed Julia Pollak, chief economist at ZipRecruiter. "These are the people who thought they were immune to economic downturns."

The irony is that these same high-income workers have been the engine of consumer spending growth. Their retrenchment could create a self-reinforcing cycle: reduced spending leads to weaker corporate earnings, which leads to more layoffs, which leads to further spending reductions.

Implications for Luxury Brands and Services

Companies that cater to affluent consumers should take note. Recent earnings reports from luxury retailers have shown signs of softening demand, with some brands reporting their first sales declines in years.

Travel and hospitality companies, which benefited enormously from "revenge travel" in 2022-2024, may see demand normalize faster than expected. High-end restaurants, which have raised prices aggressively, could face pushback from newly cost-conscious diners.

"The luxury market is cyclical, and we may be entering a more challenging phase," said Luca Solca, an analyst at Bernstein who covers luxury goods. "Companies that expanded aggressively during the boom years could find themselves overexposed."

The Wealth Effect in Reverse

Economists often discuss the "wealth effect"—the tendency for consumers to spend more when their assets appreciate. The reverse is equally powerful: when asset values stagnate or decline, spending follows.

For high-income Americans, the wealth effect works through multiple channels:

• Stock portfolios: Market declines reduce perceived wealth and spending capacity
• Home values: Flat or declining home prices eliminate home equity as a funding source
• Job security: Fear of layoffs prompts precautionary saving
• Business ownership: Small business owners facing revenue pressure cut personal spending

All of these channels appear to be activating simultaneously, creating a powerful headwind for discretionary consumption.

What This Means for the Economy

The broader economic implications depend on how long high-income pessimism persists and whether it spreads to lower-income groups.

In the short term, reduced high-income spending could actually help reduce inflation by moderating demand for services. The Federal Reserve, which has struggled to bring services inflation down to its 2% target, might view this development as welcome progress.

However, if the pessimism deepens into a genuine spending pullback, the economic consequences could be more severe. Consumer spending accounts for roughly 70% of GDP, and high-income households contribute disproportionately to that total.

"We're watching this dynamic very closely," said Joe Brusuelas, chief economist at RSM. "A confidence crisis among high earners could be the trigger that tips the economy from slow growth into actual contraction."

Silver Linings and Caveats

Not all the news is negative. High-income pessimism, while notable, hasn't yet translated into dramatic spending cuts. Retail sales data released today showed continued strength in December, suggesting that sentiment and behavior haven't fully aligned.

Additionally, the strong job market—for now—provides a buffer. As long as high earners remain employed, their spending capacity remains intact even if their willingness to spend has diminished.

The key variable to watch is layoff announcements. If major employers continue to cut white-collar positions, the current sentiment weakness could evolve into genuine economic distress. If, instead, the job market stabilizes, confidence could recover.

For now, the message from high-income America is clear: even those who weathered the pandemic economy relatively well are beginning to feel uncertain about what lies ahead. That uncertainty, more than any single economic indicator, may define the year to come.