Why America’s Upper Middle Class Is Growing

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0:31Alex Ossola:A day before President Trump's deadline on Iran, the country rejects a proposal for a ceasefire. Plus, a new report shows that the upper middle class is getting bigger and richer, even if people in it don't feel that way. So people may be upper middle class on paper, but if they can't afford to send their kids to college easily or buy a home, that doesn't really feel very affluent to them. And astronauts on the Artemis mission break a more than 50-year-old record. It's Monday, April 6th. I'm Alex Oseleff for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

1:14Alex Ossola:It's the day before President Trump's deadline for Iran to reopen the Strait of Hormuz. Earlier in the day, Iran rejected a proposal from the U.S. and regional mediators for a 45-day ceasefire in exchange for opening the Strait. President Trump said Tehran's counterproposal for a ceasefire is, quote, not good enough, though he called it a significant step. During a press conference this afternoon, President Trump answered a reporter's question about how negotiations between the two countries were going. Would a new ceasefire include Israel or would it just be between Iran and the U.S.? I can't talk about ceasefire, but I can tell you that we have an active, willing participant on the other side.

1:53They would like to be able to make a deal. I can't say any more than that.

1:58Alex Ossola:Defense Secretary Pete Hegseth said that today and tomorrow would see the largest volume of U.S. strikes on Iran since the start of the conflict. The journal has learned that the U.S. military is making preparations for potential strikes on energy targets in Iran ahead of Trump's deadline of tomorrow night at 8 p.m. Eastern. Trump threatened what would happen if Iran failed to meet it. The entire country could be taken out in one night, and that night might be tomorrow night. A reporter asked President Trump during the press conference whether he was worried that hitting civilian targets like power plants and bridges would violate the Geneva Convention.

2:32Are you concerned that your threat to bomb power plants and bridges amount to a crime? No, no, no. I hope I don't have to do it.

2:39Alex Ossola:He added that his aim was for Iran to never acquire a nuclear weapon. Stocks and oil prices both climbed as investors awaited more details on whether the Middle East war would pause or intensify this week. Major U.S. indexes held on to modest gains after Trump's press conference, with the Nasdaq adding about half a percent. Oil prices finished the day about 0.7 percent higher due to short-term supply concerns. Coming up, our reporter took a deep dive into the finances of OpenAI and Anthropic ahead of their expected IPOs. That and more after the break. We're the Hartford. With decades of experience ensuring millions of unique small businesses, when it comes to your small business insurance.

3:24Thank you. One size absolutely does not fit all. Get a quote or find an agent today at thehartford.com slash smallbusiness.

3:35Welcome back to What's News. I'm Imani Moise, host of What's News and Markets, here with an update on American wealth. The number of households considered upper middle class has tripled over the last 50 years. That's according to a recent report from conservative think tank American Enterprise Institute. Economists say that this is happening because white-collar wages have been growing faster than prices. WSJ economics reporter Rachel Ensign spoke to several families who broke into this economic tier, and they say they don't feel rich. She joins us now to explain. Thanks for joining us, Rachel.

4:06Thanks for having me. So what's happening with the middle class? Can you set the scene for us? We've heard about this new research that shows the middle class is shrinking, but it's not necessarily because a lot of people are getting poorer. it's because many people have ascended to this new level of affluence in the upper middle class. And if you look at incomes in different groups, even pegged for inflation, everyone has gotten richer over the last 40, 50 years, even accounting for inflation, but especially the most affluent people. What's interesting is the recipe that seems most surefire for joining the upper middle class or staying in it seems to be get a degree, a bachelor's degree is good, graduate degree even better, and be married or have a partner that you live with.

5:00And those two things are sort of the ticket to being in the upper middle class. That's interesting. So how are we defining the middle class, at least for the purposes of this study. In this study, they defined upper middle class as between$133 ,000 a year in annual income and$400 ,000 a year. They don't look at wealth, which is how much your home is worth, how much your stock portfolio is worth, and things like that. And you spoke to a lot of families as part of your reporting who are going through this right now. Which household dynamic do you think was the best illustration of this trend? So Randy Schilling, who is one of the people mentioned in the story, his parents didn't go to college and then he did.

5:49He got a job at a chemical plant. He's an engineer. Early on, you know, wasn't making that much money, but just kind of moved up. You know, he bought a house a long time ago that's definitely appreciated in value. So he's feeling pretty good financially. A lot of the households that you featured in your story said that they don't necessarily feel wealthy. Why is that sentiment so common? Well, it's a really good question. And that's part of why this whole phenomenon is a little surprising to people that, you know, there actually are more affluent people. Well, yeah, but everyone feels terrible about the economy.

6:24So how did those two things go together? And I think there's probably two main factors. One is that inflation on everyday things is something people still think about all the time. So even if in reality, their income has gone up a lot in the last 10 or 20 years, that feeling that everything's getting more expensive, even if you really do have the money to pay for it, it's something people are still grappling with. And then the other element is that even though it's pretty clear that everyone has gotten richer, adjusted for inflation, that the things that are the hallmarks of an upper middle class life for people, whether it's buying a home or paying for your kid to go to college, those things have gotten very, very, very expensive.

7:13So people may be upper middle class on paper, but if they can't afford to send their kids to college easily or buy a home, that doesn't really feel very affluent to them. That was WSJ economics reporter Rachel Ensign. Thanks, Rachel. Thanks, Ivani.

7:34An index tracking pricing pressures facing the U.S. services industry reached the highest reading in four years last month. That's according to a report out today from the Institute for Supply Management. The index, which is based on surveys from purchasing managers across industries like transportation, health care, and food services, rose to 70.7 in March, up from 63 the month before. That's the largest one-month increase in 13 years. Any reading above 50 means companies are facing rising prices. More inflation data from the government is due later this week. Wall Street has been racing to win government contracts tied to new savings accounts for children created last year as part of the new tax code.

8:14That race is now over. We're exclusively reporting that the Trump administration has tapped BNY Mellon and Robinhood to design and manage the accounts. Part of the reason these contracts were so coveted is that they could be a way to acquire customers for life. Tens of millions of children are eligible for the accounts, which can grow tax-deferred for decades. The platform will be a custom white-labeled product for the Treasury, meaning it won't have B &Y or Robinhood branding. Financial terms of the contracts weren't disclosed. And as we mentioned on this morning's show, sponsors are dropping out of a London music festival after controversial rapper Kanye West was named as a headliner.

8:52Budweiser parent Anheuser-Busch InBev has now become the latest sponsor to pull out, following fellow beverage makers PepsiCo and Diageo.

9:03Alex Ossola:OpenAI and Anthropic are raising toward potentially record-breaking initial public offerings by the end of this year. Our reporter Berber Jin took a deep dive into the financials of both companies. OpenAI expects to spend$121 billion on computing power for AI research in 2028. That means the company anticipates burning through$85 billion that year, even after almost doubling sales from the prior year. Losses of that size would be far bigger than those of virtually any other public company in history. But as Berber told our Tech News Briefing podcast, that's because the company has to pour more resources into creating new versions of its AI models, which it's putting out faster than ever before.

9:44I think the most surprising thing is just how much money OpenAI is set to spend on research and development. The company has made very aggressive decisions to just lock up a lot of computing capacity. And so it's high risk, high reward for open AI because you can see a world in which that gives them an edge, right? If they're putting a lot more money into training, they should have better models than Anthropic. And that should in turn give their products an advantage. But it's also really risky because it means that if they go public as they're expected to, they have to just constantly be raising money to make up for the massive amounts of cash that they're going to burn every year.

10:27So if the narrative turns on OpenAI as a public company, they're probably going to have to change their strategy when it comes to how much they spend. Otherwise, the numbers show that they literally will go out of business.

10:39Alex Ossola:To hear more from Berber, listen to tomorrow's episode of Tech News Briefing. And finally, around 2 p.m. Eastern today, the astronauts on NASA's Artemis II lunar mission broke a record. They've traveled more than 248 ,655 miles from Earth. That's the farthest distance from Earth that any humans have gone in history. Farther than the previous record holders, the crew that traveled in the Apollo 13 mission in 1970. The Artemis mission has a few thousand more miles to go before it reaches its maximum distance, which it's expected to do later today. And that's what's news for this Monday afternoon.

11:16Alex Ossola:Today's show was produced by Imani Moise, Anthony Bansi, and Alexis Green, with supervising producer Matthew Walls. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

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