The Impact of Middle Class Income on Forex Trading in the USA

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GDP per Capita in USA Middle class residence Drops by 36.5%

The prospects for The United States middle class are not looking great. Following drastic declines in GDP per capita since 2019, the World Bank has reclassified the Lebanon has a lower-middle income country instead of the previously bestowed upper-middle income status. The projected economic conditions of the United States have a direct impact on the US middle class residence.

The significant drop of 36.5% in GDP per Capita is alarming to many analysts and economists, as it leads to many potential economic threats such as rising consumer debt. One of the most dire implications for the US middle class residence is a potential wage stagnation and income decline. Over the course of the next several years, wage growth and income gaps may widen and income security might not exist at all.

Economic Factors Placing Middle-Class Residence Under Pressure

The need for the development of a better understanding of the economic state of the US middle-class residence moved the IMF to launch the American Middle Class Hopes and Anxieties Study (AMCHAS). This mixed-methods study combined questions and interviews regarding feelings of anxiety and hope economic recessions and insecurities. The intent of the research was to gain an accurate picture of the current situation and how it’s perceived in the everyday lives of the middle-class residence.

The AMCHAS project is nothing short of genius, as it takes a multi-faceted approach in gathering data. Not only is self-reported information collected, but also sentiment analysis of both positive and negative sentiment serves as an indicator of the level of hope and worry among the residents. Results from this survey can be used to aid policy makers in creating new and better anti-poverty plans and wage protection policies.

Potential Road to Recovery

Finding a road back to economic stability for the US middle-class residence can be difficult, but is not impossible. Various strategic approaches could be taken that could have a positive impact in the near future. The most apparent of these is to ensure that wages remain at a level that can allow the middle-class residence to cover basic needs while maintaining an above poverty level. This would require careful economic analysis and potentially revisions to wages on a semi-annual basis to ensure that resident wages remain in line with inflation.

Having an economic plan in place from the local to the federal level, dedicated to the economic suffering of the US middle-class residence would be the leading indicator of potential recovery. Strategic long-term and short-term plans are necessary to boost wages, bring family incomes back up to an acceptable level, and increase the security of the US middle-class residence. Without them, the future of the US middle-class residence is uncertain.

What is Middle-Class Income?

Middle-class income is an often discussed but rarely defined term. According to the Pew Research Center, middle-income Americans are defined as adults whose annual household incomes are two-thirds to double the national median income. In 2020, the national median income was $65,000, meaning that middle-class incomes range from $43,000 to $130,000 per year. This range does, though, change depending on family size and variables such as location.

Middle-class income levels are higher in areas with higher taxes and cost of living but lower in areas with lower taxes and cost of living. An analysis by the New York Times shows that the cutoff for a middle-class income varies significantly by state, as the cutoff was $48,000 in Mississippi, $92,000 in Massachusetts, and $83,000 in California.

Who Makes Up The Middle-Class?

The unsurprising truth is that the vast majority of Americans fall within the middle-income range. Approximately half of U.S. adults live in a household with an annual income of $52,000 to $156,000. As mentioned earlier, this range varies after taking into account the number of people living in the household. Rates of middle-class income households in larger families are higher and those in single-person households are lower.

Within the middle class, there are some demographic differences regarding race, education, and age. The Harvard Business School reported that middle-class households lead by white adults were more likely to have an annual household income of over $75,000 than middle-class households lead by non-white adults. They also reported that middle-class households with someone with a college degree or higher were more likely to have annual incomes of over $75,000 than those without a higher education degree.

What The Middle-Class Means for The US Economy

The middle-class population plays a major role in the U.S. economy. The spending power of middle-class households directly affects everything from spending on consumer goods, to taxes, to private investment. In fact, the spending of middle-class households accounts for approximately half of all consumer spending in the U.S.

The New York Times also shows just how entrenched in the U.S. economy the middle-class is, as middle-class people are more likely to own a home or plea for life insurance. Middle-class households are also more likely to save more for retirement, leading to greater rates of success post-retirement. As a result, the sustainability of the U.S. economy rests heavily on the success of the middle class by fueling consumer demand, investing, and increasing the tax base of the country.

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