The rich are sharing your financial pain — and contributing to it.
It might have taken longer, and it might not be as acute, but there are hints that the economic slump is crimping the lifestyles of the wealthy.
They are investing more conservatively and spending less on luxury goods and are being thriftier with their credit cards. Many are asking their personal shoppers and private-jet travel providers to seek the best deals rather than over-the-top extravagances.
That news might produce a shrug from many people who have lost their jobs or homes. The problem is that when the wealthy get stingy, it trickles down to the rest of us.
“It’s a sluggish economy, and its difficulties are felt all over,” said Joseph DiRenzo, 38, a married father of three who left a hedge fund two years ago to enter commercial real estate.
DiRenzo says he is feeling the hit, especially in the value of his house on Long Island’s upscale Gold Coast in Muttontown, N.Y.
He owns the kind of place you would expect a former hedge-fund manager would call home: six bedrooms, seven full baths, hand-crafted Italian doors throughout, high-tech security and sound systems, and 9,000 square feet of living space on 2.4 acres.
It can be had for $7 million — a good deal, he says, when you consider his neighbor’s comparable home sold for $9 million last fall. He has cut the price twice in the 12 months it has been on the market.
DiRenzo is looking for a smaller, less expensive home. He also might buy a hybrid to supplement the two Mercedes-Benzes in his four-car garage. And he is driving less these days.
The DiRenzos aren’t unlike many American families cutting back to weather a downturn. They’re just richer.
To be sure, the poor and middle class are hurting more, but upper-crust thriftiness could reverberate across the economy.
The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody’s from a 2006 federal survey.
“That does suggest those folks are important for the spending outlook and the overall economic outlook,” said Scott Hoyt, Moody’s director of consumer economics.
Other government data show households in the top one-fifth of the U.S. population ranked by income earn about half of all total personal income before taxes — an imbalance that gives the wealthy immense economic clout, said Sara Johnson, an economist at the research firm Global Insight.
“Consumer spending makes up 70 percent of gross domestic product, and when one group accounts for a very substantial share of consumer spending, they also account for a large share of the economic activity that creates jobs,” Johnson said.
On Friday, the Labor Department reported that the unemployment rate had jumped to its highest level in four years. The housing slump, tighter credit, high fuel prices and a lack of confidence are causing employers to cut expansion plans or even let employees go.
It doesn’t help when your customer base is pinching its pennies.
Trevor Gilman, a professional pilot, says his charter service out of western Massachusetts’ Berkshires Mountains has flown about half as many miles this year compared with the same time last year. Consequently, the service hasn’t replaced a handful of employees who recently found other work or retired.
“We’re down to a total of two crews for three airplanes,” Gilman said.
Unity Marketing, a Stevens, Pa.-based firm whose clients include retailers in the more than $322 billion U.S. luxury-goods market, said its latest poll of affluent people nationwide found a decline of 20 percent in spending on luxury goods in this year’s second quarter. It also found the lowest luxury consumer-confidence level in the nearly five years the survey has been conducted.
Just more than half of the 1,024 respondents earning an average income of $204,800 predicted they would spend less on luxury in the next 12 months than they did a year ago.
Luxury spending fell 4 percent last year, and this year’s decline is expected to be steeper, particularly for luxury handbags and clothing that don’t hold value, said Unity Marketing president Pam Danziger.
For most Americans, the choice has been whether to give up small indulgences, such as eating out or going to the movies, to help defray the rising cost of food and fuel.
For the wealthy, the choices have been different.
“People are examining, ‘Do you keep the yacht, do you go to the classic-car auction, do you take the private jet?’ ” said Joseph Montgomery, managing director of investments at Wachovia Securities. “Those sound like nice problems to have, but at the same time, they are issues.”
