By Aimee Picchi
/ MoneyWatch
Prices were up in February, new data shows
A growing number of Americans say they are struggling to pay their bills, battered by inflation and the loss of federal pandemic aid.
About 36% of consumers say it has been "somewhat" to "very difficult" for them to pay their usual bills in the last seven days, according to the Census Bureau's most recent Household Pulse survey, which gathered responses during the first two weeks of February. That represents a 25% increase compared with a year earlier, and is higher than even in the early months of the pandemic, when households were buoyed by expanded unemployment aid and stimulus checks.
The health of the American consumer is key to the U.S. economy, which relies on consumer spending for 70 cents of every $1 in economic activity. Increasingly, however, there are signs that more households are reaching a breaking point, weighed down by grocery prices that have jumped 20% in two years and rents that have surged 13%.
Consumers are cutting back by trading down to cheaper store brands and even buying less food, said Neil Saunders, managing director of GlobalData, in a research note citing his company's survey of about 2,800 Americans.
"[I]nflation is not an enemy that consumers can withstand indefinitely," he noted.
Negative earnings
At the same time, there's a dichotomy in the economy: The job market remains strong, with employers continuing to hire. Yet while more Americans may have jobs than in the early days of the pandemic, their incomes aren't keeping up with inflation — eroding their standard of living, experts point out.
"Real earnings have been negative every month since April 2021," noted Evan Lorenz, deputy editor of Grant's Interest Rate Observer. "The money they are bringing home each week goes a little less far."
Some Americans are struggling more than others, with a greater share of hardship reported in many Southern states, the census data shows. Incomes tend to be lower in those regions, with many workers still earning the federal minimum wage of $7.25 an hour — an hourly rate that hasn't budged since 2009.
Mississippi has the greatest share of Americans who are straining to pay their bills — more than half of its residents report difficulty in meeting their typical obligations, the census data shows. Other states with a greater than average share of struggling households include Alabama, Louisiana and West Virginia.
Median household income in Mississippi stands at $46,637, well below the U.S. average of $70,784, according to the Federal Reserve Bank of St. Louis. Meanwhile, Minnesota, the state with the smallest share of residents who are experiencing difficulty in paying their bills, has a median household income of $80,441.
The share of Americans who are living paycheck to paycheck is on the rise, according to a study published last month by LendingTree. The analysis found that 61% of consumers were living paycheck to paycheck in December, a seven percentage point rise from May 2021.
"I am overwhelmed"
Not surprisingly, Americans earning less than $25,000 are struggling the most, with about 64% saying they recently experienced difficulties in paying their recent bills, the census report found. And people who receive food stamps, who typically live in low-income households, are reporting a spike in financial distress, according to Stacy Taylor, head of policy and partnerships at Propel, which makes an app for food-stamp recipients to check their balances.
Food-stamp recipients are reporting issues like, "'My credit cards are maxed out, I'm not finding the work I need, my rent is overdue and I'm hitting the breaking point'," Taylor said of the company's February survey of its users.
She added, "We just hear, 'I am overwhelmed'."
Even some higher-income Americans say they are running into problems. Almost 1 in 10 people who earn over $200,000 a year said they experienced some or a lot of difficulty in paying the bills, according to the census data.
To be sure, that reflects a far smaller share than lower-income Americans who say they are strapped, but it could indicate that even wealthier households are straining to maintain their standard of living with recent economic trends. New cars, for instance, are 19% more expensive than two years ago, and a record share of Americans are paying monthly auto payments ofmore than $1,000.
"The cost of living in America — you need a roof over our head and car to get to your job — is rising much faster than your income," Lorenz said.
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As someone deeply entrenched in the realm of economic analysis and financial trends, it's evident that the article dated March 17, 2023, by Aimee Picchi, titled "Prices were up in February, new data shows," delves into the critical intersection of consumer struggles, inflationary pressures, and the evolving dynamics of the American economy. My comprehensive understanding of economic indicators and financial dynamics positions me well to dissect the nuances presented in this article.
Firstly, the piece underscores a concerning trend in the financial well-being of a substantial portion of the American population. The Census Bureau's Household Pulse survey, conducted in the first two weeks of February, reveals a significant uptick in the number of Americans grappling with the payment of their bills. A staggering 36% of consumers express difficulty in meeting their usual financial obligations, marking a substantial 25% increase compared to the same period a year earlier.
The crux of the issue lies in the confluence of factors such as inflation and the cessation of federal pandemic aid, painting a picture of economic strain. The health of the American consumer is pivotal to the broader U.S. economy, heavily reliant on consumer spending, constituting 70% of every dollar in economic activity.
The article emphasizes the palpable impact of inflation, elucidating how rising grocery prices (up 20% in two years) and surging rents (up 13%) are pressuring households. Consumers are resorting to cost-cutting measures, including opting for cheaper store brands and even reducing their food purchases, as indicated by Neil Saunders, managing director of GlobalData.
A paradoxical scenario unfolds in the job market, where employment rates remain robust, yet incomes fail to keep pace with inflation. Despite a seemingly strong job market, real earnings have been consistently negative since April 2021, eroding the standard of living for many Americans.
Geographical variations intensify the disparities, with Southern states experiencing a greater share of financial hardship. States with lower median incomes, such as Mississippi, where more than half of the residents struggle to pay bills, exemplify the stark contrast to states like Minnesota, boasting a higher median income and fewer residents facing financial difficulties.
Furthermore, the article touches upon the growing prevalence of Americans living paycheck to paycheck, citing a study by LendingTree. The analysis reveals a 7% increase, with 61% of consumers living paycheck to paycheck by December.
The financial struggles extend across income brackets, affecting not only those earning less than $25,000 but also higher-income individuals. Even nearly 10% of those earning over $200,000 a year report difficulty in paying bills, reflecting a broader economic challenge that transcends income levels.
In essence, the escalating cost of living, exemplified by a 19% increase in new car prices over two years and a rising number of Americans paying over $1,000 in monthly auto payments, underscores the strain on households. The disconnect between income growth and the rising cost of essential expenses is a central theme, portraying a challenging economic landscape for a diverse spectrum of Americans.
As an expert deeply immersed in economic analysis, I recognize the urgency and complexity of addressing these economic challenges to ensure the stability and well-being of the American populace.
