Mark Zandi: Stock Wealth Fuels Growth, But at What Risk?

**Mark Zandi** (0:00)
Folks in the bottom 80% of the distribution, you know, their spending has been essentially flat, no change after inflation since just before the pandemic. So their so-called real purchasing power has gone nowhere. It's not falling, at least not in the aggregate, but, you know, on average, it's basically flat, no change. And that goes, you know, that has all kinds of implications. I mean, obviously for the economy, that means that the economy is narrowly perched on what the folks in the top part of the income and wealth distribution are doing. They're really very dependent on the wealth to do.
But it also just shows you the fragility kind of of the financial situation for many households. You know, they're in a very kind of precarious spot. They're okay right now because they have, everyone has a job, unemployment is relatively low. So that's good. But they're, you know, struggling with that, with the current financial situation.

**Ed** (1:19)
Mark Zandi, welcome to Trends with Benefits.

**Mark Zandi** (1:22)
Good to be with you, Ed. Thanks for having me.

**Ed** (1:24)
Absolutely. Looking forward to this conversation.
You are Chief Economist at Moody's Analytics, and I have recently found out also that you are a host of Inside Economics podcast. And I listened to a few of those episodes. Sounds like you have a lot of fun with that.

**Mark Zandi** (1:40)
Oh, we do. It's the, you know, I do many things, have many hats, but that's the one thing every week I really look forward to. I'm with colleagues and guests, and it's a little nerdy, but if you're a little nerdy, you'll like it.

**Ed** (1:56)
Well, I love it. I mean, it's, I like the format. I like having your, hearing your colleagues, debate different things and bring up different ideas. And I think you have a segment where you look at surprising statistics.

**Mark Zandi** (2:11)
The stats game.

**Ed** (2:13)
Yeah, the stats game. That's fun.

**Mark Zandi** (2:16)
Only if you win though, Ed, you know, if you lose, not so much.

**Ed** (2:20)
I didn't realize you were playing for keeps there.

**Mark Zandi** (2:23)
Are you kidding me? We play for keeps for any, all the games we play, all, it's all for keeps.

**Ed** (2:29)
Yeah. Yeah. Yeah. Well, you know, speaking of surprising statistics, I think this episode was born of a surprising statistic. To me, surprising to me, and it's been something that you've been writing about for a while now, I think, which is the divergence between the economy and the markets.
And the stat was something like the top 20 percent of US earners account for 60 percent of consumption. And that has actually grown since you wrote about it earlier in the year. Can you tell me a little bit about that?

**Mark Zandi** (3:02)
Yeah, this goes to the skewing of spending. I mean, there's been a long running skewing of income, meaning folks in the top part of the income distribution have garnered a higher share of the income pie over the years. We know there's a skewing of wealth that's been even more pronounced, particularly with this run up in stock prices because that's so narrowly owned.
And the work we've done is to show that this skewing is not surprisingly evident also in terms of spending outlays, personal outlays. And that kind of the headline statistic, the one that you mentioned is that the folks in the top 20% of the income distribution and roughly speaking, you have to make over 200K per annum to be in that group. I know that may not sound like a lot for someone sitting in New York or San Francisco, but for someone sitting in Des Moines, that's a lot of money. 200K, those folks account for 60%, roughly 60% of the spending.
And that's increased over time. If you go back into the early 90s, that's when the data begins, it was about 50%. So the top 20, it was pretty skewed, top 20% of the income distribution accounts for 50% of the spending, but it's gotten even more skewed. And then just one other point and I'll stop. The skewing has become much more pronounced more recently. And I think that goes to the run up in stock prices and the wealth that's generated. And that's allowing folks that are well to do with lots of income and wealth to spend and they're spending. And that's behind the most recent skewing of that distribution of spending.

**Ed** (4:45)
Would some say it kind of makes sense that the people earning the most would spend the most? And so then how do you look at that data?