More US households feel pinch in finances
Circumstances change drastically from 2021
Americans are nervously grappling with soaring gasoline prices and inflation, a plunging stock market and sharply rising interest rates.
But they were doing pretty well last fall.
Seventy-eight percent of households said they were “doing okay” financially or “living comfortably,” according to the Federal Reserve’s “Economic Well-Being of U.S. Households in 2021” report. That’s up from 75% the prior three years and the highest share in the history of the survey, which the Fed has conducted since 2013.
The survey was done last October and November, before COVID-19’s omicron triggered a spike in cases and Russia launched a war on Ukraine, intensifying supply-chain bottlenecks and pushing already climbing gasoline prices and inflation higher.
Sixty-eight percent of adults said they could cover an emergency expense using just cash or its equivalent, up from 64% in 2020 and the largest share on record. The portion has steadily risen from 50% in 2013.
Parents, in particular, notched big gains, with about three-fourths saying they were “doing okay” financially, up 8 percentage points from 2020.
Americans’ perceptions of their financial health was more positive than their views of the economy. Fortyeight percent rated their local economy as “good” or “excellent,” up from 43% in 2020 but below the 63% who held that belief in 2019, before the pandemic.
Last year, Americans were benefitting from a hot labor market with record job openings and sharply rising wages. That’s because many people were still on the sidelines because of COVID-19 concerns, child care duties or other reasons, sparking widespread
worker shortages.
Many households also were still flush with cash as a result of government stimulus checks and other aid.
Those positive dynamics are still in play but inflation has ratcheted higher, spurring aggressive Fed rate hikes and market sell-off. Some top economists believe a recession is likely within 12 months.
And many lower- and moderate-income income household were still financially squeezed. Fifteen percent of adults with incomes below $50,000 struggled to pay bills because of varying monthly income. And 8% of renters were behind on their payments last fall while 17% of were behind at some point last year, higher than before the health crisis.
Still, the generally strong household finances captured in the Fed survey could help keep consumers spending and avoid a downturn or ensure that the slump is mild, says Mark Zandi, chief economist of Moody’s Analytics. Other survey findings:
● 15% of workers said they were in a different job than the previous 12 months. Just more than 6 in 10 said the new job was better overall, while one in 10 said it was worse.
● 7% of adults ages 25 to 54 said they weren’t working, and COVID-19 concerns were at least part of the reason.
● 77% of employees said their companies were taking the right amount of precautions against COVID-19.
● Nearly a fourth of homeowners with a mortgage refinanced it last year, including 3 in 10 with incomes above $100,000 and 16% of those with incomes less than $50,000.
● 93% of parents with a child in school said their youngest child at the K-12 level was attending classes completely in person, up from 27% in 2020.
● 12% of student loan borrowers were behind on payments, down from 17% in the fall of 2019.
● 40% of people still working thought their retirements nest egg was on track, up from 36% in 2020 and 37% in 2019.
● 25% of adults who retired during the previous 12 months and 15% of those who retired two years ago said COVID-19 effects contributed to the timing of their decisions.