The death of the average consumer and the rise of economic castes

Executives scanning macroeconomic dashboards are seeing green lights. GDP growth remains positive. The S&P hovers near record highs. The May payroll report posted +139,000 jobs.

If you're running capital allocation off these signals, it feels like an all-clear.

It isn't.

The average American consumer is dead. What we call "the market" has fractured into three separate economies: asset-rich households buying premium everything, debt-burdened families cutting essentials, and a fluid segment of AI-native freelancers swinging between both behaviors based on their latest gig.

This isn't market segmentation. For 60% of the lower wealth holders, who drive only 20% of consumer spending, it's economic triage.

The three-speed economy: system leverage, tool leverage, and system abandonment

We are witnessing the emergence of a new market segmentation, where beliefs and aspirations are no longer aligned with reality. We can no longer pretend every customer has similar capacity to act, regardless of what they believe or desire.

1. System Leverage in the fast lane: Big Tech salaries, boomer wealth, and asset appreciation. Think Magnificent 7 employees cashing RSUs and retirees riding property/portfolio gains. They're not leveraging new tools—they're benefiting from old systems working perfectly. Premium everything: $8 coffee, $80,000 EVs, European vacations.

2. System Abandonment and life in the slow lane: Debt-burdened families where traditional employment pathways have disappeared. Median unemployment stretches to 9.5 weeks—up from 9 last year. Over 20% search for six months or more. They lack both the assets to benefit from existing systems and the digital fluency to leverage new tools.

3. (E)merging lane & AI tool leverage: AI-native freelancers, gig workers, and career switchers using new platforms to create income streams. They swing between premium purchases and ramen months based on project flow. High agency, high volatility, zero safety net.

This segmentation isn't theoretical. System Leverage consumers are powering top-line brand strength. System Abandoned consumers are in functional contraction. Tool Leverage could go either way, and your positioning may determine where they land.

The illusion of averages: when your dashboard lies

The Establishment Survey (the one making headlines) counts payroll employees at established firms. It shows +139,000 jobs in May. Looks healthy.

The Household Survey counts everyone actually working: freelancers, gig workers, contractors, side-hustlers. It dropped by 696,000 people in May, the worst single-month decline since April 2020.

Six of the past twelve months showed net declines. The average monthly change across the entire year: -30,400 people leaving the workforce. Every month.

This isn't a monthly blip. It's a sustained hemorrhage running through the same period when markets hit records and executives celebrated resilient employment.

While you were seeing green lights, an entire segment of the economy was quietly contracting. It's a lot of people, who admittedly and tragically don't carry as much economic clout as the former middle class once did.

This isn't measurement error. It's structural divergence. System Leverage workers show up in Establishment data. Tool Leverage workers show up in Household data. The System Abandoned don't show up anywhere—they've stopped looking.

Your dashboard aggregates all three groups into one number. But they're living in completely different economies.

AI isn’t only replacing labor, it's blocking entry

This isn’t about mass layoffs. Companies aren't firing en masse. (Well, some still are.) They're just not replacing people.

Junior marketers who used to write blog posts. Administrative assistants who scheduled meetings. Entry-level analysts who built spreadsheets. Research associates who summarized reports.

Gone. Not automated away—simply not hired.

The churn cycle that once trained middle management is collapsing. Companies discovered they can run leaner with AI handling the grunt work that used to be someone’s first job.

Younger professionals and career switchers aren't being displaced. They're being denied entry entirely. Tough times for graduates with knowledge worker degrees to be sure.

We’re building an economy with no on-ramps. The result is a dual-risk problem:

1. Leadership pipeline degradation.
2. Intergenerational income immobility.

Your labor market doesn't look volatile. It looks efficient.

But efficiency, here, is fragility.

Strategic blind spots: misreading the market

This isn't about timing the next recession. It's about acknowledging that one is already in progress for a wide swath of your customers.

Growth capital is being allocated based on models that no longer reflect economic reality.

Your labor market isn't "softening." For millions of people on the ground, it's stratifying.

While establishment surveys show modest job gains, the underlying structure is reorganizing into something resembling feudal economics: asset-rich nobility, entrepreneurial merchants, and a growing class of economically abandoned workers with no viable pathways.

The Fed is tightening (QT). But credit delinquencies are rising.

Student loan payments are back. But median unemployment stretches to 9.5 weeks and climbing.

We are applying blunt macro tools to an economy that's splitting into distinct castes. That is a strategic error.

Seven things executives should be doing now

1. Segment performance by economic leverage, not demographics. Asset-rich customers and debt-constrained customers aren't just different income brackets—they're operating in fundamentally different economies.
2. Audit your talent pipeline assumptions. The entry-level roles that once fed your management ranks may no longer exist. Map the succession gaps before they become leadership crises.
3. Abandon traditional customer segmentation. Income bands and age cohorts no longer predict purchasing behavior. Segment by economic volatility and leverage instead.
4. Concentrate capital allocation. The economic middle is hollowing out. Overweight premium and defensive positioning. Underweight the disappearing center.
5. Plan beyond official recession calls. Economic reality precedes NBER declarations by quarters. Your revenue teams will feel structural shifts long before economists acknowledge them.
6. Assess systemic political risk. Large-scale economic displacement creates unpredictable regulatory and social pressures. Factor institutional instability into long-term planning.
7. Build alternative talent development pathways. Traditional hiring and training models are breaking down. Create new systems for identifying and developing capability.

The signals are real but you might have the wrong receiver

The firms that adapt early won't just weather this shift. They'll define the new playbook.

Everyone else? Still staring at their dashboards, waiting for indicators that were calibrated for an economy that no longer exists.

We are now managing through a three-speed fracture that's permanently reshaping who has economic power.

Your business isn't just serving different customer segments, we are all now operating across entirely different macro economies running in parallel.