Many Americans are struggling financially in the current economic climate. Rising costs of living coupled with stagnant wages have put a strain on household budgets across the country. In this article, we will examine several key indicators to determine if Americans are truly suffering financially or if the situation is more nuanced.
Wage Growth and Inflation
One of the most telling signs of financial struggle is when wages fail to keep up with the rate of inflation. Unfortunately, this has been the case for many American workers in recent years. According to data from the Bureau of Labor Statistics, real average hourly earnings decreased 0.1% from July 2021 to July 2022. At the same time, the Consumer Price Index (CPI) increased by 8.5% over the same period. This means the purchasing power of workers’ wages declined significantly as the costs of consumer goods and services rose.
The table below outlines wage growth compared to inflation over the past five years:
| Year | Average Hourly Earnings Growth | Consumer Price Index Inflation |
|---|---|---|
| July 2021 – July 2022 | 4.7% | 8.5% |
| July 2020 – July 2021 | 4.0% | 5.4% |
| July 2019 – July 2020 | 6.7% | 1.0% |
| July 2018 – July 2019 | 3.3% | 1.8% |
| July 2017 – July 2018 | 2.7% | 2.9% |
As the table shows, inflation has outpaced wage growth in recent years, especially in the last 12 months as prices surged. This dynamic has severely impacted workers’ financial standing.
Debt Levels
Another indicator of financial health is the amount of debt held by households. When incomes fail to keep up with expenses, many turn to credit cards, loans, and other methods of borrowing to make ends meet.
Total household debt in the United States surpassed $16 trillion in the first quarter of 2022. This represents a $1 trillion increase from one year prior. The table below shows the breakdown of the different types of debt held by American households:
| Type of Debt | Total Debt (in trillions) |
|---|---|
| Mortgages | $11.2 |
| Student Loans | $1.6 |
| Auto Loans | $1.5 |
| Credit Card | $0.9 |
| Other | $0.9 |
Mortgages account for the lion’s share of household debt at nearly $11.2 trillion. However, credit card balances and other consumer loans are also up as households lean more heavily on plastic to afford essentials. Average credit card interest rates now exceed 19%, compounding the financial challenges many families face.
Savings Rates
With wages failing to keep up with inflation and debt levels rising, many Americans have little left over to save for emergencies and retirement. The personal savings rate dipped to just 5.1% in July 2022, far lower than the 13.1% peak in April 2021. Pre-pandemic, the savings rate hovered around 8%, demonstrating decreased capacity today.
Low savings intensifies the impact of unexpected expenses. Over 60% of Americans cannot cover a $1,000 emergency with savings according to a 2022 Bankrate survey. For those living paycheck to paycheck, any unplanned cost can force more debt.
Food Insecurity
Perhaps the most direct measure of financial hardship is food insecurity – the disrupted access to affordable, nutritious food. Feeding America estimates that 53 million Americans face food insecurity today, including 17 million children. Their research reveals a significant portion of households served by food banks are regularly employed. This suggests financial hardship reaching beyond the unemployed.
Surging grocery prices are partly to blame. Prices rose 13% over the last year forcing families to make tough choices at the supermarket. Federal nutrition assistance is also failing to fully close the gap. The maximum benefit for the Supplemental Nutrition Assistance Program (SNAP) currently equates to about $1.50 per meal, making it difficult for participants to maintain healthy diets.
Housing Affordability
Housing continues to be the single largest monthly expense for consumers. Record-low inventory, inflated prices, and rising mortgage rates have all converged to create an affordability crisis in many parts of the country.
Nationwide, the median listing price for a home is $425,000 as of August 2022. This reflects a nearly 15% increase from last year. Mortgage rates for 30-year fixed rate loans have shot up to nearly 7% in 2022, more than doubling from the record-lows of last year. This translates to a $900 increase in the monthly payment for the median priced home.
These factors leave many struggling to find affordable living accommodations. Nearly half of renters are cost-burdened, spending over 30% of their income on housing. And competition for affordable rentals remains tight, with vacancies around historic lows.
Conclusion
After examining the data on wages, inflation, debt levels, savings, food insecurity, and housing, it appears Americans are under increasing financial pressure. Stubbornly high inflation coupled with mostly stagnant wage growth has severely impacted purchasing power. Households are borrowing more to make ends meet with little left over to save. Cutting back on food and facing unaffordable housing costs have become a reality for far too many.
While the underlying causes are complex, the economic data paints a picture of declining financial health for many. Without substantial policy changes or shifts in corporate behavior, these financial burdens seem poised to intensify over the coming months. Americans are undoubtedly suffering through a period of heightened financial strain.