Inflation is squeezing American budgets to the breaking stage.
According to a LendingClub survey, the number of Americans living paycheck to paycheck is nearing report levels.
As of September, 63% of Americans were living paycheck in order to paycheck. That’s just one proportion point below the record high of 64% last spring. To put it into viewpoint, the number of people feeling this sort of strain a year ago was around 57%.
LendingClub financial health officer Anuj Nayar said Americans are unable to keep up with rising prices.
Consumers are not able to keep up with the pace that will inflation is increasing. Being employed is no longer enough for the daily American. Wage growth has been inadequate, leaving more consumers than ever with little to nothing left over after handling monthly expenses. ”
While wages have increased, they have not kept pace with increasing prices. On an annual basis, real average hourly earnings decreased by 3. 0% from September 2021 in order to September 2022 (seasonally adjusted). It was the 18th consecutive month of declining true wages on an annual base.
This means when you got a 5. 2% raise over the last year, your purchasing power dropped 3%. In other words, you have more bucks in your pocket, but you can’t purchase as much with them. In effect, you have a 3% pay cut this year.
That is impacting household budgets.
Even high-earners are struggling to make ends meet with rising prices. Of six-figure earners surveyed by LendingClub, 49% reported living salary to paycheck, a leap from the previous year’s 38%.
With financial constraints strained and prices rising, American consumers have been required to cut back on purchases. Sixty percent of those surveyed said they have reduced their spending.
High prices are also driving some people to dip directly into savings. According to a survey by Bankrate. com , the portion of people who are uncomfortable using the amount of money in savings has become 58%, up from 44% two years ago.
Meanwhile, many Us citizens are turning to credit cards to handle everyday expenditures. Revolving credit, primarily reflecting credit card debt, rose by an additional $17. 1 billion in August. To put the eighteen. 1% increase into perspective, the annual increase in 2019, prior to the pandemic, was 3. 6%. It’s pretty obvious that with stimulus cash long gone, Americans have considered plastic in order to make ends meet since prices continue to skyrocket.
This probably clarifies why consumer emotion tanked in October . There was some consumer optimism in the previous two months, probably because of talk that inflation was cooling. But the latest CPI data made it clear an end to inflation is nowhere in sight. The Conference Table Consumer Confidence Index launched Tuesday dropped to 102. 5 this month, the decline from 107. 6 in September and 103. 2 in August.
“ Notably, concerns about inflation, which had been receding since July, indexed again, with both gas plus food prices serving since main drivers, ” Lynn Franco, senior director of economic indicators at The Conference Board said.
The bottom line is that persistent pumpiing is causing significant financial pain.
Economists and pundits talk about pumpiing as an academic exercise. They rarely reflect on the fact that increasing prices have real effects on real people. And if you happen to be somebody living on a fixed income or cost savings, you’re really screwed because inflation is rapidly eating away your purchasing power and your income streams tend to be not increasing at all. Inflation at all times causes the most pain for the poor and elderly.