Valley economist discusses shrinking middle class, housing and inflation

Feb 27, 2024, 4:35 AM | Updated: 1:49 pm

PHOENIX — While the lower class grows larger, the middle class is shrinking, one Valley economist said.

According to Jim Rounds of Rounds Consulting Group, there are one and a half earners per household on average.

“They’d have to make about $75,000 each in order to be considered middle class, just with all the extra burdens,” Rounds told KTAR News 92.3 FM’s The Chris and Joe Show on Monday.

Most Arizonan households fall below that threshold. The median household income in Arizona was $72,581 from 2018-2022, according to the U.S. Census.

The shrinking middle class is a nationwide issue. The percentage of adults who live in middle-class American households fell from 61% in 1971 to 50% in 2021, according to the Pew Research Center.

“We have to build more affordable homes,” Rounds said. “Not everybody can go buy the median price home, nor should you expect them to be able to.”

Will middle-class Americans be able to afford homes in this economy?

Although the inflation rate is currently around 3%, it can feel much higher, Rounds said.

It all comes down to what he calls the “sticky up” effect.

“When you have prices declining, they jump back up really quick when the economy changes. When you have prices go up, they get stuck there for a while. They don’t come down that quickly,” he said.

The high price of gas reflected that effect for a while, he said.

Food and other necessities are still stuck in those high prices — and it may take customers getting fed up and refusing to buy expensive products for prices to finally fall, Rounds said.

Only time will tell if consumers can sway the notoriously costly housing market.

“Housing is very expensive and that’s something that we have to work on across the nation,” Rounds said. “There’s a lot of stuff we can do on the state level to help people on the margins.”

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Valley economist discusses shrinking middle class, housing and inflation