According to Matthew Boss, an analyst at J.P. Morgan Chase, the US economy is in a “selective recession” because low-income consumers cannot afford the cost of living.

In an interview on Tuesday, Boss said there are differences between high- and middle-income American consumers, who are struggling to cope with rising costs of living while prices continue to be high and savings are declining.

Boss said, “High-end consumers are becoming more picky. I think the low-end market is like a melting ice cube... I now call it a 'selective recession'. According to our survey, currently over 70% of low-income consumers say they are struggling to make ends meet.”

Other market commentators have also pointed out that consumer spending is about to slow as middle class Americans feel the pressure of inflation. In Primerica's first quarter survey, 67% of middle class households felt that their income could not keep up with the increase in the cost of living.

Citibank CEO Jane Fraser also said earlier that she has seen a “K-type consumer” model where wealthy consumers increase their expenses while low-income households struggle with higher living costs.

Fraser said, “We are seeing lower income consumers being more cautious. They are feeling more pressure on the cost of living. The cost of living has always been high and increasing. As a result, although they have employment opportunities, the level of debt repayment is higher than before.”

Although inflation has cooled significantly from its 2022 high, consumers are still suffering the effects of years of cumulative price increases. According to the US Bureau of Labor Statistics, overall consumer prices are 22% higher than they were five years ago.

Boss said, “We are focusing on low- and middle-income consumers. They are under pressure, and the real source of the pressure is continuing inflation. Prices are heating up a little bit every month, and it doesn't matter if inflation worsens; this is a bit of a drain on their accumulated savings.”

Most Americans may have exhausted their savings during the pandemic. According to a paper by San Francisco Federal Reserve economists, additional savings during the COVID-19 pandemic may have been exhausted in March of this year. In Primerica's survey, 38% of middle class respondents added that they don't have a $1,000 emergency fund.

Concerns about the recession are growing as Americans examine the deteriorating job market and expect interest rates to remain high for an extended period of time. The New York Federal Reserve estimates in its latest recession forecast that the probability that the US will fall into recession within the next 12 months is 50%.