More Americans say finances are tighter because of inflation

Americans have jobs. They get raises. And none of this is enough to meet the rising cost of living.

According to the Federal Reserve’s latest survey of Americans’ financial well-being, released Monday, the share of American adults who said they were doing “at least financially well” fell sharply last year, from from 78% to 73% in 2021. Some 35% of Americans said they were worse off than a year earlier, down from 20% in 2021 and the highest share in the nine years the question has been asked. Only 19% of respondents said they were better off than a year earlier.

The erosion of financial health was widespread, crossing racial and ethnic boundaries, education categories and income groups.

The data, drawn from the Fed’s survey of the economy and household decision-making, echoes other surveys showing Americans feeling gloomy about the economy and their own finances. But it provides new details on how the economic ripples of a strong labor market and rising prices are affecting families.

The labor market is, by many measures, the strongest in decades, with unemployment near a half-century low, job openings near record highs and workers feeling empowered. to demand higher wages. The benefits of this environment are clear in the Fed survey: Respondents said they were more likely to have asked for and received raises and promotions than in previous years, and less likely to have lost their jobs. . Around 33% of respondents said their income had increased in the past year, up from 30% in 2021.

But those gains have been wiped out by rising prices. Only 49% of Americans said they spent less than they earned each month, down from 55% in 2021. Nearly two-thirds said they used a product less or stopped using it entirely due to inflation . More than half said they saved less.

The decline in overall wellbeing in 2022 was the largest in the survey’s 10-year history, but it partly reflected 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% of adults said they were doing at least financially well, barely above the 2022 figure.

Democratic leaders, including some White House officials, have sometimes dismissed economic sentiment surveys, arguing that more concrete measures of income and jobs tell a rosier story. Overall personal income has generally increased even after adjusting for inflation, although gains have slowed in recent months and wages have risen fastest for the lowest paid workers.

But on a call with reporters, Fed officials noted that the survey showed declines not only in subjective measures of economic sentiment, but also in more objective measures. Only 63% of respondents said they had money available to cover an emergency expense of $400, for example, compared to 68% in 2021.

The survey was based on detailed interviews with more than 11,000 US households and was conducted in October.