Inflation may have slowed last year, but it continued to deal heavy blows — some devastating — on Americans’ livelihoods: Nearly two-thirds of US adults were worse off because of it, and roughly 1 in 6 couldn’t pay all their monthly bills, new Federal Reserve data shows.
The Fed on Tuesday released its Economic Well-Being of US Households report for 2023, examining the financial lives of US adults and their families. The report found that 72% of adults surveyed said they were “doing okay” financially. That’s a tick lower than last year but well below the high of 78% hit in 2021 (and still above the record low of 62% in 2013).
Inflation made the financial lives “worse” for 65% of US households, according to the report. Among those, 19% said it was “much worse.”
The findings were drawn from the Fed’s 11th annual Survey of Household Economics and Decisionmaking, which looks at American’s economic health across a variety of areas, including employment, income, banking and credit, housing, retirement planning, student loans, childcare and even Buy Now, Pay Later usage.
But even in a time when broad economic data highlights a remarkably resilient economy — job growth has been stellar and pay gains have been strong, which have helped fuel spending and keep the economy rolling — not everyone feels that upbeat. Three-plus years of high inflation have taken their toll on Americans’ wallets and their psyches.
Skipping meals, medical care
That was especially true in 2022, when US inflation hit 9.1%, its highest annual rate in more than 40 years. As of last month, annual inflation was 3.4%, according to the Consumer Price Index.
Incomes grew healthily in 2023, but so did spending, the Fed report showed. Monthly budgets remained tight and more than half of adults didn’t have money left over after paying their expenses.
This was especially true for lower-income adults, who reported higher instances of not having enough to eat, not being able to cover bills in full and skipping medical care.
Overall, 17% of adults reported they could not pay all their bills in full in the month prior to the survey, which was conducted in October 2023.
“The [Survey of Household Economics and Decisionmaking] provides valuable insight into the financial conditions of American households,” Fed Governor Michelle Bowman said in a release accompanying the report. “This perspective continues to help the Federal Reserve better understand how families are coping with the ongoing economic challenges they face.”
Perspectives on local, national economy
The report showed improvement in people’s feelings about how their local economy fared — with 42% saying it was “good” or “excellent,” versus 38% the year before. However, that share is a far cry from how people felt pre-pandemic: In 2019, 63% felt their local economy was in good or excellent health.
Zooming out to the national economy, it was a similar story: People’s perceptions improved from 2022 (22% last year, up from 18%), but they remain well below the 50% share notched in 2019.
Tuesday’s report showed similar measures of financial resiliency to what was reported in 2022, with 63% of adults saying they’d be able to cover a $400 emergency expense with cash on hand.
While that share is below the recent high of 68% hit in 2021, it’s well above what was seen during the past decade. In 2013, only 50% said they could pay for a $400 emergency expense with cash, Fed data shows.
Child care expenses eat up budgets
While the financial well-being was generally unchanged from 2022 for most Americans, Fed researchers highlighted one particular segment that saw a signifcant downward swing: Parents living with children under the age of 18. The share of respondents from that group who said they were “doing okay” fell to 64% from 69% in 2022 and from 75% in 2021.
For those with younger children, child care expenses were considerable in 2023. Paid child care expenses amounted to 50% to 70% of what parents shelled out for their monthly housing payment, according to the report.
Child care expenses, along with homeowners’ insurance, food sufficiency and caregiving responsibilities, were among the new topics discussed in the report.
In terms of homeowners’ insurance, the report found that adults who have a higher risk of being financially affected by a natural disaster were less likely to be insured. Nearly 25% of homeowners who live in the South and make under $50,000 a year did not have homeowners’ insurance, the Fed found.
