A dismal picture of America’s economic health is painted in a new study from PYMNTS and LendingClub. As of June, 61% of Americans — approximately 157 million people — was living paycheck to paycheck, according to the report. That’s up from 58% who said they lived paycheque to paycheque in May, and 55 percent compared to a year ago.
“Last summer, we were all concerned about how quickly the economy would bounce back. Now, as inflation rises higher, customers are finding it more difficult to control their spending and are depleting their savings as financial concerns grow, “ said Anuj Nayar of LendingClub’s Financial Health Officer in a press release.
According to Nayar, customers are still not slowing down their spending habits, even as prices rise. “Not only will future emergency expenditures be difficult for them to manage, but even anticipated payments like school loans or housing expenses may be more difficult for the average American consumer to handle,” he stated. Almost half of US consumers spent more than they earned in the previous six months. Because of these trends, average savings are decreasing rapidly. Average savings fell from $11,724 in May 2022 to $10,757 in June 2022, according to the poll.
Living pay check to pay check does not always imply that someone is barely able to afford essentials, according to Bank of America. It can also signify that a family is spending the bulk of its money on everyday costs.
Households on a lower income, who spend a greater proportion of their budget on energy and transportation expenses, have been affected the most by recent inflation in those areas.
Even high-income individuals are not immune: “Though lower incomes generally link to financial distress, 36% of people who make $250,000 or more per year live paycheque to paycheque,” the report reads.
Hourly earnings are up 5.1% year-on-year, yet costs have been rising at a faster rate, offsetting bigger paychecks. There are also indications that wage growth is slowing significantly, making matters worse for US workers.