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The Upper Middle Class Is Getting Squeezed


Mark Yu had a profitable pandemic. Like many Americans, he added to his savings and pulled in big gains from the stock-market rally. He purchased a house in his new hometown of McAllen, Texas, then a duplex and an eight-unit apartment complex in Cleveland.

But 2022 hasn’t been so kind. His expenses have grown because of higher costs for gas, groceries and the dog food for his four German shepherds. The value of his stockholdings is shrinking. He is sending more money back to his family in the Philippines to help them cope with rising prices there. A cracked foundation in his new house cost tens of thousands of dollars to repair.

Mr. Yu, a 33-year-old who has lived in the U.S. since 2014, is now taking on credit-card debt and typically working seven days a week. Previously, he was socking away as much as $3,000 a month into a brokerage account. This year, a couple-hundred is the most he had been able to muster and he hasn’t put anything in for the past three months.

His story is similar to that of a number of upper-middle-class Americans who are seeing their two years of pandemic gains eroded.

Mark Yu, a physical therapist, has been hit by higher expenses and a lower value of his stockholdings this year.

While poorer families might feel the effects of inflation more deeply, they also have had the biggest wage increases and have the smallest share of their net wealth invested in financial markets.

The richest families, meanwhile, have been hurt by market losses but have been insulated from the worst of inflation. Goods that have had the sharpest price jumps, such as gasoline, automobiles and home utilities, account for a relatively small percentage of their spending.

Over the first three months of 2022, upper-middle-class families lost a bigger chunk of their stock portfolios than the people who make more than them, according to the Federal Reserve. Since the pandemic started, they saved less than most of the people who make less than them, according to Moody’s Analytics.

The value of their liabilities grew by 2% in this year’s first quarter, more than any other group, as they took on greater debt for auto loans, credit cards and other consumer credit.

Upper-middle-class households are defined here as those earning between $75,301 and $127,300 a year, according to the Fed. They make more money than at least 60% of other households, but less money than the top 20% of earners.

Economists at Bank of America Corp. estimate that upper-middle-class households, as well as the group right below them, are feeling inflation more than other income groups. These households spend a bigger portion of their budgets on driving expenses, since they tend to live in suburbs or more rural areas and commute into cities, they said.

Many of these workers got unemployment benefits during the pandemic, but the benefits didn’t pay as much as their jobs did—unlike lower-wage workers, who often got more money from unemployment benefits than from working. Their savings on travel and events during pandemic lockdowns was less pronounced than that of higher-income households with more discretionary spending power.

U.S. households of all income levels saved an additional $2.7 trillion between the first quarter of 2020 and the fourth quarter of 2021, according to Moody’s Analytics, thanks to stimulus checks, enhanced unemployment benefits and being stuck at home. Higher prices have pushed families of almost all income levels to start dipping into their pandemic savings this year. Upper-middle-class households started eating into their pandemic gains earlier and more aggressively.

Despite their relatively large salaries, upper-middle-income Americans have less in excess savings than all but the poorest U.S. households, both in aggregate and per household, according to Moody’s Analytics. (The poorest households are defined as those earning $28,400 or less a year.)

Mark Zandi,
Moody’s Analytics’ chief economist, suggests that this is at least partially the result of government policy. Individuals earning more than $99,000 were barred from receiving any of the three pandemic stimulus checks, and those making upward of $75,000 received reduced payments or none at all. Similar “phaseout” income restrictions were placed on the $3,000 child-care tax credit.

Since June 2021, consumer sentiment for households earning $100,000 to $150,000 has fallen by the most of all economic groups, according to an index by data provider Morning Consult.

Kern Barrow retired in 2018 as a physician assistant. Last month he returned to work part-time, driving vehicles for a car-rental company three days a week, so he could stop making withdrawals from his declining retirement accounts.

“During the pandemic I saved a lot, was able to bank a substantial amount of money,” said Mr. Barrow, 69. Now, “I’m drawing on that savings this year more than adding to it.”

Mr. Barrow has also cut back on driving, all but cut out restaurants and shopping, and is now less generous with his granddaughters, ages 12 and 16. He also traded in his Dodge Challenger for a hybrid sedan to save on gas.

Kern Barrow was dipping into his retirement savings, so he decided to return to work part-time and cut some spending.

Daniel Roberts, an IT project manager, retired at the beginning of the year. The $100,000 drop in his 401(k) has him rethinking the idyllic postwork life he envisioned, especially since he taps the fund for his $1,400 monthly mortgage.

The home that he and his wife, Robin, own in Idyllwild, Calif., a town in the San Jacinto Mountains where the mayor is a golden retriever named Maximus Mighty-Dog Mueller, has more than doubled in value since they purchased it in 2017. Still, Mr. Roberts feels stuck. “There is no way we could rent a similar home in California for that amount if we were to sell,” he said.

What’s more, home sales are slowing. While median prices are still rising, existing-home sales have fallen for five months in a row to the lowest rate since June 2020. Sales of homes priced below $500,000 declined by 19% in June from their June 2021 level, according to the National Association of Realtors, compared with an 11% decline for all houses. The share of sellers lowering their asking prices hit a record during the four weeks ended July 3, according to real-estate brokerage firm Redfin.

Mr. Yu, the Texas physical therapist, is trying to get through this year.

The homeowners insurance premium on his Texas home has doubled, and the taxes on his Cleveland investment properties have increased significantly. He also has spent heavily to refurbish and repair those properties, and he said he is paying out more on them each month than he is making back in rent.

He is also taking on extra shifts, often working 6 a.m. to 8 p.m. He dipped into his savings and is considering borrowing against his investments in his brokerage account.

He is confident, though, that the stock market will rebound along with his own fortunes. He hopes to visit his parents in the Philippines at the end of the year, as he hasn’t seen them since 2016. “It’s a low mood right now,’’ Mr. Yu said. “But I’m optimistic.”

Write to Dion Rabouin at

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