On paper, the U.S. economy looks strong. Unemployment is low, inflation has cooled from its 2022 peak, and GDP continues to expand. But if you ask the average American how they feel, the answer is very different. Consumer sentiment today is nearly as pessimistic as it was during the 2008 financial crisis or the stagflation era of the early 1980s.
As a real estate investor who has spent decades watching the economy cycle, I’ve learned to pay close attention to these disconnects. Numbers may say one thing, but when millions of Americans feel like they are falling behind, there is usually a deeper story that investors need to understand.
The Wage Problem No One Wants to Talk About
Inflation gets headlines, but wages are the real issue. A huge portion of the U.S. workforce, possibly two-thirds, does not earn enough to support a family of four. Even with inflation easing, real wages are lower than they were in 2020. That means many people simply do not feel better off, no matter what the economic reports say.
Here is what that looks like in practice:
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The top 10% of earners now account for about half of all consumer spending.
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The bottom 60% account for less than 20% of spending, down from over 26% three decades ago.
This is a massive shift. It means a majority of workers are becoming economically “invisible,” while the top earners keep driving the economy forward.
Why the Disconnect Matters
For policymakers and investors, this disconnect has real consequences.
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Federal Reserve policy: Historically, higher unemployment drags down spending, forcing the Fed to cut rates. But if laid-off workers do not contribute much to spending in the first place, unemployment can rise while the economy still grows. That creates a dangerous trap: cut rates to protect jobs, and risk reigniting inflation.
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Corporate strategy: Companies like Walmart are now targeting higher-income shoppers, because that is where the growth is. Lower-income consumers are cutting back, and businesses are following the money.
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Social stability: When millions of workers feel shut out of prosperity, you see growing divisions, declining trust in institutions, and even shifts in political ideology. Only half of Americans now have a positive view of capitalism, while support for socialism is rising.
What This Means for Investors
As real estate investors, we cannot afford to ignore these structural shifts. If consumer spending power is consolidating at the top, housing demand will reflect that. We will see:
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More demand for premium rentals and communities that serve higher-income households.
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Slower growth in markets dependent on middle- and low-income renters unless wages begin to catch up.
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A bigger divide between “haves” and “have-nots,” shaping everything from multifamily absorption to rent growth.
I have said it before: cash flow is king. But cash flow depends on tenants who can actually afford their rent. Understanding where wage growth is happening, and where it is not, is critical for making the right investment decisions in today’s market.
Final Thoughts
The U.S. economy can keep growing even if many Americans feel left behind, but only for so long. Ignoring wage stagnation risks not just consumer sentiment, but the health of our free markets.
For investors, this environment calls for careful market selection, disciplined underwriting, and a sharp eye on who your renters are. The headline economy might look strong, but the “real economy” your tenants live in could tell a very different story.
Because at the end of the day, the health of the U.S. economy does not just depend on growth. It depends on broad participation. And for long-term investors like me, that is something we cannot afford to ignore.
