The cost of living is still top of mind for U.S. workers as they say inflation continues to trounce their income gains, according to new research from Bank of America (BOA).
Sixty-seven percent of workers believe inflation is outpacing their salary or wage growth, up from 58 percent in February 2022.
Inflation and economic uncertainty have exacerbated financial stress, resulting in financial wellness among employees falling to 42 percent, the lowest level since the BOA initiated this research in 2010. Fewer workers are concentrating on their long-term retirement savings so they can prioritize their financial needs, such as putting together a rainy-day fund and paying off credit card debt. Women are enduring money-related stress, as 54 percent think they can’t keep their heads above water because of inflation. By comparison, 32 percent of men feel the same way.
But over the next two to three years, more than half (56 percent) of workers are “cautiously optimistic” about their financial health.
“American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, said in the report. “Companies who show a sense of urgency for their workforce by offering financial wellness programs and resources which support employees’ immediate needs and overall well-being will continue to stand out as employers’ of choice.”
Inflation and Jobs
Despite inflation growth slowing from the 9.1 percent peak in June 2022, price pressures have reaccelerated this past summer.
The annual Consumer Price Index (CPI) rose to 3.7 percent in August, up from 3.2 percent in July. The Producer Price Index (PPI), which is considered a precursor to the CPI, surged by 0.7 percent month-over-month in August.
At the same time, real (inflation-adjusted) average hourly earnings for all employees fell by 0.5 percent, the latest Bureau of Labor Statistics (BLS) data show. Moreover, since President Joe Biden took office in 2021, real average hourly earnings are down by 3.1 percent.
Household income growth expectations have eased this year, with one-year-ahead predictions sliding to 2.9 percent in August from 4.6 percent in December 2022, according to the Federal Reserve Bank of New York’s Survey of Consumer Expectations.
The latest results from the monthly WalletHub Economic Index show consumers’ stress levels have ballooned by more than 7 percent compared to the same time a year ago. In addition, consumers are facing diminishing financial optimism and weakening job security.
The recent University of Michigan Consumer Sentiment Index shows waning enthusiasm surrounding economic conditions. The preliminary reading for September shows that consumer sentiment has been retreating since hitting a near two-year high in July and falling short of market estimates.
“Consumers have taken note of the stalling slowdown in inflation, but they do expect the slowdown to resume,” Joanne Hsu, the surveys of consumers director, noted in the report.
Falling Support for Bidenomics
A new ABC–Washington Post survey published over the weekend found that 44 percent of Americans believe that they are worse off financially under President Biden.Earlier this month, a CNN poll found that 58 percent of voters think President Biden’s policies have worsened economic conditions, up from 50 percent in the same poll a year ago.
Likewise, a Wall Street Journal poll from earlier this month shows that 3 out of 5 Americans disapprove of President Biden’s economic policies.
But the current administration insists that the economy is doing better than the public’s perception. This past summer, President Biden touted his accomplishments, and officials alluded to various data proving that his sweeping economic agenda is exceeding expectations.
With various measurements pointing toward a slowdown, Treasury Secretary Janet Yellen downplayed the numbers, telling CNBC on Sept. 18, “I don’t see any signs that the economy is at risk of a downturn.”
The headline numbers continue to point to an expanding economy. The Atlanta Fed GDPNow model estimate shows third-quarter gross domestic product (GDP) growth at 4.9 percent, while the New York Fed Nowcast projects real GDP growth coming in at 2.1 percent.
In recent weeks, the White House has adopted a different strategy, highlighting the differences between Bidenomics and so-called MAGAnomics.
“They tell you what they’re against. What are they for? It’s like they want to keep it a secret. I don’t blame them,” President Biden told a Maryland crowd. “Their plan, MAGAnomics, is more extreme than anything America has ever seen before. Just months ago, they went further than anyone has ever gone threatening to default on the debt.”
