Which Members to Serve In a Bifurcated Economy?

In today’s uncertain economy some are doing quite well.  Others are worried about their future.  An analysis from  Louisiana Corporate’s September 2025 Economic & Financial Digest  describes this as the “bifurcated economy”:

“One of the most under recognized trends since the Covidpandemic is the increased bifurcation of the U.S. economy. High income households have thrived, thanks mainly to surging stock and home prices that have greatly enhanced the net worth of this cohort.

“Conversely, lower income households have fared less well, particularly after the generous pandemic related stimulus payments ran out. This cohort has relied primarily on income growth, which has notched decent gains early in the pandemic recovery amid labor shortages but has since tapered off as the economy has slowed. Indeed, recent data show that wage gains of lower-paid workers are not keeping pace with that of higher earners.

“Importantly, lower income households are likely to be more affected by the impact of tariffs because they spend a disproportionate share of their income on the most affected goods. What’s more, they have less of a savings cushion to withstand the hit to incomes that the tariffs on these goods impart.

“. . .wealthier households spend a larger share of their incomes on services and, hence, are less exposed to the tariff impact. They can finance their discretionary spending out of wealth gains and their larger savings cushions.

While a small fraction of the population, high-income households account for more than 50 percent of total spending. That means, of course, that economic growth is more dependent on the drivers of wealth – the stock market and house prices. That’s a positive influence when stock prices and housing values are rising, but a big risk if, and when, they sputter.

The Consumer  is Still Spending

Here’s how the bifurcation affects affects consumer spending from last week’s  Marketplace broadcast ( link) Consumers are feeling pessimistic about the economy, but don’t expect them to stop spending gave this analysis:

The Conference Board reported Tuesday its Consumer Confidence Index fell in August. Americans are getting less optimistic about their future income, and they aren’t sanguine about business and labor-market conditions going forward. In fact, both of those metrics in the Conference Board survey are sitting below the threshold that typically signals a recession is coming. That lines up with the University of Michigan’s index of consumer sentiment, which deteriorated this month — from a level that was already pretty mediocre. . .. And yet, consumers won’t necessarily be pulling back on spending and hunkering down at home in a miasma of gloom and doom. . . Consumers are also worried that tariffs will drive up prices and squeeze household finances. They say they plan to spend less going forward. “For big-ticket items, but also for services, like going on vacation, going to restaurants,” said Conference Board analyst Stephanie Guichard.  Expect these plans to be more frugal? Guichard of the Conference Board said we’ve heard them before.  “I mean like a year ago, they were telling us they were going to be cautious, and at the end of the day they were not,” she said. Instead consumers kept spending it up.  “And the main reason is, as long as U.S. consumers have a job and have income, they tend to spend it,” said Guichard. But here’s the thing: It really matters which consumers we’re talking about. The Challenge How should credit unions prioritize their member service needs?