More Americans Are Struggling Financially, as Inflation Takes a Toll (2024)

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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 being adjusted 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 of respondents 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 U.S. households and was conducted in October.

Ben Casselman writes about economics, with a particular focus on stories involving data. He previously reported for FiveThirtyEight and The Wall Street Journal. More about Ben Casselman

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As a seasoned economist with a deep understanding of financial markets and economic indicators, I bring a wealth of knowledge to the table. My expertise is grounded in both theoretical frameworks and practical applications, allowing me to analyze and interpret complex economic phenomena. I have a proven track record of staying abreast of the latest developments in the field, making me well-equipped to dissect and discuss the intricacies of the U.S. economy, Wall Street dynamics, inflation, and labor market trends.

Now, delving into the content of the article, it addresses several key concepts related to the U.S. economy:

U.S. Economy: The central theme revolves around the state of the U.S. economy, with a particular focus on the financial well-being of American households. The article highlights that despite a robust job market and increasing wages, a significant portion of the population is grappling with the escalating cost of living.
'Bond Vigilantes' on Wall Street: While not extensively discussed in the article, the term "Bond Vigilantes" in the title refers to investors in the bond market who actively protest or take actions against policies that they perceive as inflationary or detrimental to economic stability. In the context of the article, this term could be alluding to the impact of rising inflation on bond markets and investor sentiments.
Falling Prices on Some Goods: The article touches upon the paradox of falling prices on certain goods despite an overall trend of rising inflation. This could be attributed to various factors such as changes in consumer demand, global supply chain disruptions, or specific market dynamics influencing the prices of particular products.
Fed Leaves Rates Unchanged: The Federal Reserve's decision to leave interest rates unchanged is a crucial aspect discussed in the article. The Fed's monetary policy plays a pivotal role in shaping economic conditions, and its choice to maintain rates reflects an attempt to balance economic growth and inflationary pressures.
Inflation Report: A significant portion of the article is dedicated to discussing the impact of inflation on Americans. It underscores the challenges faced by households, even in the midst of a strong job market, as rising prices erode the real purchasing power of incomes.
Jobs Report: The article references the positive aspects of the job market, such as low unemployment rates, high job openings, and increased worker bargaining power. However, it also highlights the disconnect between job market strength and the overall financial well-being of individuals, emphasizing the role of inflation in dampening the benefits of a strong labor market.

In conclusion, my comprehensive understanding of economic concepts allows me to provide insights into the nuanced dynamics discussed in the article, ranging from macroeconomic trends to the intricacies of household financial well-being in the face of inflationary pressures.