More Higher Earners Report Living Paycheck to Paycheck
A new survey by PYMNTS.com and LendingClub found that 64 percent of American consumers were living paycheck to paycheck at the end of 2022, which is 3 percent higher than in 2021 and an increase of 9.3 million Americans. Most of the additions to that category were among the country’s higher earners, with nearly 8 million of them making more than $100,000 annually.
“Prospects for consumer spending are cloudy. Elevated prices, eroded personal savings and increased reliance on credit point to weak consumer spending this winter,” said Lydia Boussour, senior economist at EY Parthenon, according to Bloomberg. “These dynamics will be exacerbated by negative wealth effects from lower stock prices and declining home values.”
The most recent University of Michigan survey showed that while consumer sentiment has risen from 2022 lows, it still remains below pre-pandemic levels. Inflation-adjusted disposable incomes have stayed below their pre-pandemic levels, so consumers have not seen any real income increase, according to the Bureau of Economic Analysis.
2023 may bring more financial pressure, as less than half of survey respondents said they expect their incomes to keep up with inflation. 27 percent believe their personal finances will get worse, and nearly one-third think they will stay the same. For those that believe their situation will worsen, 75 percent said inflation was the top reason, and about one-third cited economic uncertainty.
However, The Hill noted that 4 out of 5 consumers said they expect their financial situations to get better, which increased 7 percentage points from July 2022, but this response was most commonly seen in those making over $100,000 per year.
The report also found that 72 percent of those not living paycheck to paycheck showed concern about economic uncertainty, compared to 62 percent who cited inflation.