60 Percent of US Adults Living Paycheck to Paycheck: Report

People shop in a Target store in Los Angeles, Calif., on Feb. 13, 2023. Mario Tama/Getty Images

Americans are still struggling to save money at the end of each month amid the increased cost of living, although not quite as much as they were a year ago, according to a new report by LendingClub and Pymnts.

The report is based on a survey of 4,163 U.S. consumers conducted from Jan. 6 to Jan. 27, as well as an analysis of other economic data.

It found that as of January, 60 percent of U.S. adults, including more than four in 10 high-income consumers, live paycheck to paycheck, although that’s down from 64 percent in January 2022.

According to the report, 45 percent of consumers annually earning more than $100,000 reported living paycheck to paycheck in January 2023, down from 48 percent at the same time last year.

An earlier Pymnts/LendingClub survey in December last year found that around 64 percent of consumers were left with little to no money to spend at the end of the month, marking 9.3 million more than the year before.

Elsewhere, according to the latest report, the share of middle-income consumers—those earning between $50,000 and $100,000 a year—and low-income consumers—those earning less than $50,000 a year—reporting that they are living paycheck to paycheck also dropped over the past year, and is now at 64 percent and 74 percent, respectively.

Consumers ‘Making Behavior Changes’

The findings suggest that consumers may have better adjusted their spending, cutting back to manage their cash flows amid ongoing inflation, which has seen the costs of everything from groceries, rent, and travel surge.

“While it’s too early to indicate a trend, consumers have accepted that inflation is part of their everyday lives, and they are actively making behavior changes, especially during the 2022 holiday shopping season, to adjust their spending and better manage their cash flow,” said Anuj Nayar, financial health officer at LendingClub, in a press release.

In addition, the report found that 42 percent of American consumers were living paycheck to paycheck without issues paying their monthly bills in January 2023, which is the same percentage reported in January last year.

Meanwhile, the share of those struggling to pay their bills dropped from 22 percent a year ago to 19 percent in January 2023, the report found.

The report comes shortly after the Personal Consumption Expenditures (PCE) Price Index—which measures the prices that people living in the United States are paying for goods and services and is the Federal Reserve’s preferred measure to gauge inflation—came in higher than anticipated last month.

The core PCE Price Index, which excludes the volatile food and energy sectors, was up to 4.7 percent from a year ago, up from 4.6 percent. Wall Street had been expecting a 4.4 percent increase.

In addition, core PCE prices, again excluding food and energy, were up 0.6 percent month over month, up from 0.4 percent.

More Interest-Rate Hikes Ahead

The Department of Commerce also reported that consumer spending rose more than expected in January, with spending up 1.8 percent, the largest increase since March 2021. Economists polled by Reuters had forecast consumer spending rebounding 1.3 percent.

When adjusted for inflation, consumer spending increased 1.1 percent. Meanwhile, personal income adjusted for inflation increased 1.4 percent, and the personal saving rate was also up 4.7 percent from 4. 5 percent in December, the highest in a year.

That data suggest that inflation may persist for longer than anticipated, declining at a slower rate, which could prompt the Federal Reserve to further tighten its monetary policy as it strives to reach its inflation goal of 2 percent.

The central bank is widely expected to deliver two additional rate hikes of 25 basis points in March and May.

“Clearly, tighter monetary policy has yet to fully impact consumers and shows that the Fed has more work to do in slowing down aggregate demand,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. “This report all but insures the Fed will continue on its rate hiking campaign for a lot longer than markets anticipated just a few weeks ago.”

While speaking to CNBC on Feb. 22, James Bullard, president of the Federal Reserve Bank of St. Louis, said he expects a more aggressive interest-rate hike in the coming months, and advocated for a top rate of nearly 5.4 percent.

“We’ve got a little ways to go here, and I’ve argued that ‘Hey, let’s get to where we want to go,’ and then from there we can see how the data come in. Let’s hope that we get disinflation in 2023,” Bullard said.