Inflation Forcing More Americans to Live Paycheck to Paycheck

Real disposable income falling dramatically even as household debt service as a percent of disposable income is rising. Federal Reserve Economic data, St. Louis Fed / Chart: Jeffrey A. Tucker

Persistent inflation is forcing more and more Americans to live paycheck to paycheck, according to a new report from the Lending Club.

The report, a collaboration between LendingClub and financial news and analysis platform PYMNTS, is based on data from a survey of 3,495 U.S. consumers conducted between Aug. 10 and Aug. 29, 2022.

It found that three in five U.S. consumers were living paycheck to paycheck in August, with nearly one-fifth of those stating that they were struggling to pay their bills.

According to the report, among American consumers earning between $100,000 and $150,000 annually, 54 percent are living paycheck to paycheck, marking an increase of 7 percentage points from July 2022.

Overall, the number of Americans living paycheck to paycheck has increased over time, with 62 percent of consumers earning between $50,000 and $100,000 annually are living paycheck to paycheck in August, up from 57 percent in September 2021, according to the report.

High-income earners were not immune to the impacts of inflation either, according to the report, which found that 45 percent of those earning more than $100,000 per year were living paycheck to paycheck, marking a 7 percentage-point increase from September 2021, when just 38 percent said they were living paycheck to paycheck.

The report comes as inflation has hit 40-year highs, eating away at the spending power of Americans who are forking out more for everything, from food to gasoline and rent.

Households Feeling the Strain

A separate Gallup poll published earlier in September found that the majority of Americans said that price increases have resulted in financial hardship for their household.

The results are based on an Aug. 1–22 web survey of 1,500 members of Gallup’s probability-based panel.

It found that 56 percent of Americans said price increases are causing financial hardship for their household, up from 49 percent in January and 45 percent in November. Of those respondents who said the rising cost of living had resulted in financial hardship, 12 percent said this was “severe” hardship and 44 percent said it was “moderate.”

Despite this, the Biden administration has maintained its rhetoric that inflation levels are barely shifting, and that a recession isn’t on the cards, while the Federal Reserve has continued to implement aggressive interest-rate hikes in an effort to cool down red-hot inflation, initiating another 75 basis-point rate hike on Sept. 21.

“More consumers living paycheck to paycheck indicates that many are continuing to lose their financial stability,” said Anuj Nayar, financial health officer for LendingClub.

“Yet, the share of consumers living paycheck to paycheck with issues paying their bills has dropped seven percentage points in the past year. Many have moved to what now may constitute a stable lifestyle: living paycheck to paycheck, but still managing to pay your monthly bills. There is just nothing left over at the end.”