The labor market is beginning to cool, and it's hurting America's highest income cohort the most.
New data from Bank of America released Thursday shows that the number of US households in the $125,000+ income bracket receiving unemployment benefits increased by more than 60% in July from a year ago, per the bank's internal data. That compares to an increase of about 40% for households making $50,000 to $125,000 annually, and a rise of more than 20% for those in the under $50,000 bracket.
Overall, the unemployment rate remains historically low.
"Our deposit data continues to show signs that unemployment is picking up from these very low levels at a faster pace for higher-income earners," BofA Institute wrote on Thursday. "The number of such households who received an unemployment benefit deposited into their Bank of America account rose by around 3x the rate for the lower-income group."
Recent data from the Bureau of Labor Statistics showed the US economy added 187,000 jobs in July, the fewest since December 2020, notably lower than the monthly average of 312,000 over the past year. After analyzing the BLS data, the BofA Institute noted that the highest-wage industries are experiencing the slowest jobs growth.
Those individuals bringing in more than $125,000 a year are seeing their salaries and wages increase at the slowest pace, too, with yearly increases landing just barely positive. Meanwhile, those who make less than $50,000 have seen year-over-year wage increases of 3% on average while those in the $50,000 to $125,000 bracket have seen their wages increase 2%, per BofA's data.
"It is possible higher-income households may be feeling a little more cautious up to this point," BofA Institute wrote.
Higher-income earners still spent more than any other income cohort during a monthlong period for the first time this year during July. This perhaps indicates that even with jobs ticking lower excess savings for higher-income individuals can still buoy spending.
Consumer spending has come into focus over the summer as the American economy has proved more resilient than many feared. It's also the largest contributor to Gross Domestic Product (GDP), which has consistently come in more robust than economists projected and has some pushing back or removing their recession calls altogether.
"We still think consumer spending slows and growth drops below trend, but we are in effect saying most of the lags are behind us and the neutral policy rate is higher, meaning current policy is not as restrictive as we previously thought," BofA US economist Michael Gapen wrote as part of his explanation for why the bank's economics team no longer sees a recession.
Part of the story of slowing consumer spending headed into the end of the year and 2024 stems from dwindling bank balances and the absence of pandemic-era stimulus in consumer bank accounts. But BofA Institute points out median deposit balances in their accounts were still at least 30% higher in July 2023 than the average in 2019.
The team at BofA used its data to project when customer deposit accounts would come down to their 2019 levels. In both a standard projection, which uses the current rate of depletion, and an accelerated path, deposits would remain above 2019 levels until at least September 2024, "which would still suggest plenty of resilience."
Josh Schafer is a reporter for Yahoo Finance.
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