More Americans Are Struggling Financially, as Inflation Takes a Toll
Americans have jobs. They’re getting raises. And none of it is enough to keep up with the rising cost of living.
The share of US adults who said they were doing “at least OK financially” fell sharply last year, to 73 percent from 78 percent in 2021, according to the latest Federal Reserve survey of Americans’ financial well-being, released on Monday. Some 35 percent of Americans said they were worse off than a year ago, up from 20 percent in 2021 and the highest share in the nine years the question has been asked. Just 19 percent of respondents said they were better off than a year earlier.
The erosion in financial health was broad-based, cutting across racial and ethnic lines, educational categories and income groups.
The data, from the Fed’s Survey of Household Economics and Decisionmaking, echoes other surveys showing that Americans feel glum about the economy and their own finances. But it provides new details on how the economic crosscurrents of a strong job market and rising prices are affecting families.
The job market is by many measures the strongest in decades, with the unemployment rate hovering near a half century low, job openings near record highs and workers feeling empowered to demand higher pay. The benefits of that environment are clear in the Fed survey: Respondents said they were more likely to have demanded and received raises and promotions than in previous years, and less likely to have lost a job. About 33 percent of respondents said their incomes had risen in the past year, up from 30 percent in 2021.
But those gains were overwhelmed by rising prices. Only 49 percent of Americans said they spent less than they made each month, down from 55 percent in 2021. Nearly two-thirds said they used less of a product or stopped using it entirely because of inflation. More than half said they saved less.
The drop in overall well-being in 2022 was the largest in the survey’s 10-year history, but that partly reflected the gains made in 2021, when the federal government was still providing high levels of assistance to many households through the expanded Child Tax Credit and other programs. In 2019, before the pandemic, 75 percent of adults said they were doing at least OK financially, only modestly above the 2022 figure.
Democratic leaders, including some White House officials, have at times dismissed surveys of economic sentiment, arguing that more concrete measures of income and employment tell a rosier story. Overall personal income has generally been rising even after adjusting for inflation, although gains have slowed in recent months, and wages have risen fastest for the lowest-earning workers.
But in a call with reporters, Fed officials noted that the survey showed declines not just in subjective measures of economic sentiment but also in more objective measures. Only 63 percent said they had cash available to cover a $400 emergency expense, for example, down from 68 percent in 2021.
The survey was based on detailed interviews with more than 11,000 US households and was conducted in October.