Our July 2012 barometer found that 45% of Affluents are now optimistic about the U.S. economy, significantly outnumbering the 35% who are pessimistic. (Note: we define “Affluent” as the 25% of U.S. adults living in households with at least $100,000 in annual household income). But it’s been something of a wild ride over the past two months. Affluent optimism in the economy tumbled 8 percentage points in June, to just 36%, amid a rising tide of employment concerns (one of our research participants expressed her pessimism this way: “Jobless numbers may be permanent … things seem stagnant and kind of a low ‘new normal’”).
But amid slightly better economic and employment perceptions, optimism rebounded 10 percentage points in July, back to the mid-40’s levels we saw in much of Q1 2012, and significantly above the levels seen throughout Q3-4 2011. Clearly, Affluent attitudes today are fluid and malleable, reflecting a skittishness and fundamental uncertainty about a host of factors – the domestic economy and job market to be sure, but also European economic woes, government gridlock, the upcoming Presidential election, and more. For Affluents, this is a summer of uncertainty indeed.
This widespread uncertainty plays a role in a fundamental fact of today’s Affluent marketplace – for the most part, Affluents today simply don’t feel Affluent. This feeling isn’t new – for most, it is part of the lingering hangover of The Great Recession. But it is particularly pronounced in the summer of uncertainty.
In our June 2012 barometer, we asked Affluents about “the 1%” who are now featured in so many headlines. We found that Affluents over-estimate the requirements for “membership in the 1%,” believing (on average) that it takes $1.4 million in annual household income to join the club, when in fact our analysis of data from the Census Bureau’s 2011 Current Population Survey shows it takes “only” $325,000. In terms of net worth, Affluents on average believe it takes $10.8 million to join the 1% club; in fact, our analysis of data from the 2010 Survey of Consumer Finances (conducted by the Federal Reserve Board) shows it takes $6.8 million.
Moreover, most Affluents don’t expect to join the 1%ers. In fact, most Affluents don’t feel affluent at all, and significantly underestimate their financial standing. Affluents, all of whom by definition are in the top 25% of U.S. adults, feel “middle of the pack,” and believe that they are in the 38th percentile (on average). This phenomenon isn’t just limited to the “mass affluent.” Examining the top 2-3% of U.S. adults, those with at least $250,000 in annual household income (“Ultra Affluents”), we find they feel “merely affluent,” and believe they are on average only in the top 21%.
It’s a summer of uncertainty indeed – about the economy, about the future, and even about one’s own standing in today’s financial hierarchy.