How inequality may worsen stagflation

Although job growth accelerated in July, the Census Bureau reported that 12% of households were facing food insecurity, up from 10% at the beginning of 2022. The wealthiest 40% of households represent 60% of economic spending, while the poorest 40% represent 22% of spending.

Why should we care?
The stark inequality defining US economics also informs the kinds of decisions economic regulators make—and, in the long run, affects fintechs serving a variety of demographics. At present, while low-income households are running out of the savings they shored up at the onset of the Covid-19 pandemic, wealthier households have continued to spend at runaway speed, helping fuel continued inflation. “If richer families don’t pull back as much—if they keep going on vacations, dining out and buying new cars and second homes—many prices could keep rising,” Jeanna Smialek and Ben Casselman report for the New York Times. Looking at rising prices rather than at the state of affairs for low-income residents, the Fed may raise interest rates until prices fall; doing so risks sparking a slowdown that will only exacerbate conditions for working-class people, who tend to be the first to have their wages and hours cut back. This unequal landscape may be a boon to fintechs across the board, from payday loan services to high-APY checking account providers. But the US’ largely contradictory economic landscape—in which some consumers are thriving, driving inflation, while others struggle to secure food and housing—should be a cause for alarm, and compel fintechs to work in lockstep to improve economic conditions across income levels, not just the deep-pocketed.