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Americans ‘Financially Worse Off’ in 2022

By Andrew Moran

The percentage of US adults who reported feeling worse off financially rose to 35 percent in 2022, the highest level since the Federal Reserve (Fed) began tracking this data in 2014.

The Federal Reserve Board on May 22 released its “U.S. Household Economic Well-Being in 2022” report, an annual estimate of the financial well-being of adults and their families derived from the Survey of Household Economics and Decisions (SHED). Fed Governor Michelle Bowman said the data was important to help “clarify our understanding of the economic challenges facing US households.”

Data from the Fed showed that rampant price inflation hit households the hardest and weighed on their overall economic condition compared to last year, despite a strong labor market.

73 percent of adults said they were “doing well financially in 2022,” down 5 percent from last year. Thirty-five percent of adults admitted to being worse off financially, the highest figure since the series began nearly a decade ago.

In addition, more adults endured an increase in spending than an increase in income, with 40 percent telling the central bank that their household’s monthly expenses had increased over the past year, compared with 33 percent who reported an increase in monthly income. Almost a quarter of adults (23 percent) admitted that their expenses have increased, but their income has remained stable.

Inflation changed consumers’ spending and saving choices, with many saying they stopped buying or used less because of price pressures. More than half (51 percent) have reduced their savings in an inflationary climate.

Eggs in a Washington grocery store in January. 19, 2023. (Stephanie Reynolds/AFP via Getty Images)

The share of respondents who said they would cover a $400 emergency expense using cash or cash equivalents was 63 percent, down 5 percentage points.

The economic climate in 2022 also affected retirement goals, with 31 percent of non-retirees believing their retirement savings plan was on track, down from 40 percent in 2021.

“Building retirement savings can have an impact on financial well-being later in life,” Fed researchers said in the report. “79 percent of retirees said they were doing well financially. However, retirees who received income from sources such as wages, pensions or investments were much more likely to at least be doing well financially than those who had no private income.”

SHED data found that nearly two-thirds of renters could not afford a down payment, which affected their ability to purchase a residential property.

“Some tenants reported having difficulty keeping up with their rent payments,” the Fed reported. “Seventeen percent of renters fell behind on their rent at some point in the last year.”

At the end of 2022, the median U.S. rent was $2,305, up nearly 5 percent from last year.

The rising cost of living kept many renters on the sidelines as the median sales price of homes for sale in the United States hit a record high of $480,000.

On the labor front, the numbers revealed a strong employment scene. One-third of adults received a raise or promotion, and 70 percent of those who asked for a raise received a raise.

According to the Bureau of Labor Statistics (BLS), real wage growth (adjusted for inflation) in 2022 was negative.

Will 2023 be better?

While the annual inflation rate slowed to below 5 percent in April, a wide range of reports indicated that Americans remain pessimistic about current economic conditions.

According to a new Gallup poll, 61 percent of respondents said inflation has caused financial hardship for their households. Furthermore, inflation at 35 percent is the most important financial problem facing their family today, followed by owning an apartment (11 percent), too much debt (9 percent), not having enough money or a low salary (7 percent).

“Even as inflation cools, the impact of continued high prices has exacerbated the financial pain Americans are feeling,” the polling firm said.

The CNBC All-America Economic Survey found that a record 69 percent of US adults had negative views of the current and future economy amid sticky inflation, recession fears and high borrowing costs.

Nearly 40 percent say their finances are in worse shape than a year ago, according to the New York Fed’s Survey of Consumer Expectations (SCE). A year later, inflation expectations will be 4.4 percent.

Similarly, a new survey from the National Association of Business Economics (NABE) reports that 98 percent of business forecasters expect inflation to remain above the central bank’s 2 percent target rate.

The March Survey of Economic Outlook (SEP) suggested that the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, would ease to 3.3 percent in 2023 and 2.5 percent in 2024.

Economists say PCE is more accurate than CPI because the former is broader and includes spending by urban and rural consumers, employers and nonprofit organizations. PCE is also adjusted periodically to reflect current purchases and replacements.

But while Fed Chair Jerome Powell blamed negative supply shocks (energy and non-energy goods and labor) for inflation at the Thomas Laubach Research Conference’s “Outlook for Monetary Policy” discussion on May 19, some U.S. lawmakers say the central bank is integral to played a role. in raising inflation to the highest level in the last 40 years.

“The Fed’s monetary policy is one of the main drivers of inflation that we’re seeing,” said Rep. Brian Stiles (R-Wisc.) told The Epoch Times.

Jackson Richman contributed to this report.

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