One-Third of Americans ‘Worse Off Financially’ in 2022 Amid Inflation: Federal Reserve

People shop at a grocery store in Columbia, Md., on May 17, 2023. Madalina Vasiliu/The Epoch Times

The percentage of U.S. adults reporting that they were worse off financially climbed to 35 percent in 2022, the highest level since the Federal Reserve started tracking this statistic in 2014.

The Federal Reserve Board published on May 22 its “Economic Well-Being of U.S. Households in 2022” report, an annual assessment of the financial well-being of adults and their families that draws from the Survey of Household Economics and Decisionmaking (SHED). Fed Gov. Michelle Bowman said the data are crucial to help “refine our understanding of the economic challenges facing U.S. households.”

Fed data highlight that rampant price inflation affected households the most and made a dent in their overall economic health from the previous year, despite a strong labor market.

Seventy-three percent of adults said they were “doing at least okay financially in 2022,” down by 5 percent from the previous year. Thirty-five percent of adults admitted to being worse off financially, the highest figure since the series began nearly a decade ago.

More adults endured spending increases than income gains, as 40 percent told the central bank that their family’s monthly expenses rose from the previous year, compared with 33 percent who reported a monthly income boost. Twenty-three percent of adults reported that their spending jumped but their income was flat.

Inflation altered consumers’ spending and saving choices, with most saying they stopped consuming a product or used less because of price pressures. More than half (51 percent) trimmed their savings amid the inflationary climate.

Eggs in a grocery store in Washington on Jan. 19, 2023. Stefani Reynolds/AFP via Getty Images

The share of respondents who confirmed that they would cover a $400 emergency expense using cash or its equivalent was 63 percent, down by 5 percentage points.

The 2022 economic environment also affected retirement goals, with 31 percent of nonretirees thinking their retirement savings plan was on track, down from 40 percent in 2021.

“Building retirement savings can have implications for financial well-being later in life,” the Fed researchers said in the report. “Seventy-nine percent of retirees said they were doing at least okay financially. However, retirees who received income from sources such as wages, pensions, or investments were much more likely to be doing at least okay financially than those who had no private income.”

SHED figures show that nearly two-thirds of renters couldn’t afford a down payment, affecting their ability to purchase a residential property.

“Some renters indicated they had difficulty keeping up with their rent payments,” the Fed reported. “Seventeen percent of renters were behind on their rent at some point in the prior year.”

At the end of 2022, the median U.S. rent was $2,305, up by nearly 5 percent from the previous year.

The growing cost of living kept many renters sitting on the sidelines as the median sales price of homes sold in the United States reached a record high of $480,000.

On the labor front, the numbers revealed a robust employment arena. One-third of adults received a raise or a promotion, and 70 percent who asked for a raise were given one.

Real wage growth (inflation-adjusted) was negative throughout 2022, according to the Bureau of Labor Statistics.

Will 2023 Be Better?

Although the annual inflation rate has slowed to below 5 percent in April, many reports suggest that Americans continue to be pessimistic about current economic conditions.

According to a new Gallup poll, 61 percent of respondents said inflation has caused financial hardship to their households. Moreover, 35 percent said inflation is the most important financial problem facing their family today, followed by owning a home (11 percent), too much debt (9 percent), and a lack of money or low wages (7 percent).

“Even as inflation has been cooling, the effect of continued high prices has broadened the financial pain Americans are feeling,” the polling firm stated.

The latest CNBC All-America Economic Survey found that a record 69 percent of U.S. adults held negative views about the present and future economy amid sticky inflation, recession fears, and higher borrowing costs.

Nearly 40 percent say their finances are worse off than a year ago, according to the New York Fed’s Survey of Consumer Expectations. Inflation expectations for a year from now stand at 4.4 percent.

Likewise, a new survey by the National Association for Business Economics reported that 98 percent of business forecasts expect that inflation will remain above the central bank’s 2 percent target rate.

The March Summary of Economic Projections suggests that the Fed’s preferred inflation gauge—the personal consumption expenditures price index (PCE)—will ease to 3.3 percent in 2023 and 2.5 percent in 2024.

Economists say the PCE is more accurate than the consumer price index because the former is broader and includes expenditures by urban and rural consumers, employers, and nonprofit organizations. The PCE is also regularly adjusted to reflect current purchases and substitutions.

But although Fed Chair Jerome Powell blamed negative supply shocks (energy and nonenergy commodities and labor) for inflation during the May 19 Perspectives on Monetary Policy panel discussion at the Thomas Laubach Research Conference, some U.S. lawmakers say the central bank played an integral role in lifting inflation to its highest level in 40 years.

“The kind of the monetary policies put forward by the Fed is one of the key drivers of inflation that we’re seeing,” Rep. Bryan Steil (R-Wisc.) told The Epoch Times.

Jackson Richman contributed to this report.