According to a recent study, more than half of all American adults today live paycheck to paycheck.
Despite recent indications that inflationary pressures are easing, the percentage of Americans who report feeling stretched thin has remained persistently high.
By many standards, the squeezing effects of increasing costs on consumers ought to be subsiding.
Recent data indicates that prices have started to fall, at least when compared to the skyrocketing inflation of a year ago. The individual consumption expenditures price index likewise reached its lowest yearly level in more than two years, but the consumer price index, which gauges inflation, grew by 3% from a year earlier.
And yet, as of June, a new Lending Club survey found that 61% of Americans, which is unchanged from a year ago, still claim to be living paycheck to paycheck.
Studies reveal that lower-income workers have been particularly severely hit by price increases, especially for food and other necessities as such costs make up a larger portion of their budgets. According to data from Lending Club, in June, almost 75% of consumers with yearly incomes under $50,000 and 65% of those with incomes between $50,000 and $100,000 were living paycheck to paycheck.
There are fewer high earners who are having financial difficulties. Only 45% of individuals making $100,000 or more said they were living paycheck to paycheck, according to the study.
In accordance to a separate CNBC Your Money Financial Confidence Survey carried out in March, the majority of adults, or 52%, which includes high earners, said they have become more financially stressed since before the Covid pandemic started in 2020. This is largely because of inflation, rising interest rates, and a lack of savings.
According to the report, 58% of Americans are struggling to make ends meet.
The gap is being filled by credit cards.
Still, more than half of all American consumers find it difficult to maintain their standard of living, which forces some of them to depend more on credit cards or deplete their savings, leaving them exposed to debt.
Credit cards are filling the gap for many homes because budgets are still very tight, according to Greg McBride, chief financial analyst at Bankrate.
“People aren’t financing products at 20% because they have other options,” he continued. They have no other choice, therefore they’re acting in that way.
The Federal Reserve, on the other hand, increased interest rates once more last week in an effort to rein in inflation.
After the rate increase, Fed Chairman Jerome Powell declared that future rate decisions would be based on new information rather than a predetermined course of action.
Despite recent encouraging trends, central bank officials typically consider that inflation is still too high and prefer to wait for several months of reliable data before making any significant changes.