Fed Rate Hike May Not Address Economic Woes Amid Widening Wealth Gap

The Federal Reserve recently raised interest rates to combat inflation, but the move may not be effective in addressing the country's economic woes. According to data, the top 20% of U.S. households now account for approximately 60% of consumer spending, while the middle-class wage-price margin has collapsed by 115% from its prewar baseline.

The same imbalance shows up in who captures the economy's gains. Labor's share of nonfarm business output fell to 52.8% in the second quarter, the lowest level on record. Meanwhile, U.S. household wealth rose a record $12.8 trillion in the second quarter, including $10.7 trillion in gains from equities.

However, those gains were not broadly shared. The wealthiest 10% of households hold more than 87% of equities, meaning they were positioned to capture most of those gains.