Nearly two-thirds of Americans living paycheck to paycheck as inflation grows: study

United States one dollar bills are curled and inspected during production at the Bureau of Engraving and Printing in Washington, D.C., November 14, 2014. | (Photo: Reuters/Gary Cameron)

Nearly two-thirds of American consumers, including some 33% of those earning more than $250,000 annually, are living paycheck to paycheck as inflationary pressure continues to wreak economic misery around the world, a new report from PYMNTS and LendingClub suggests.

The study, "New Reality Check: The Paycheck-To-Paycheck Report," is based on a survey of 4,048 U.S. consumers conducted from April 6 to April 13, along with an analysis of other economic data.

"The U.S. government's April 2022 Consumer Price Index report finds that inflation has risen 8.3% over the past 12 months, with energy and food prices increasing the most. And while costs everywhere are going up, more pandemic-related restrictions are lifting across the country, meaning that staying in and saving money may be harder than ever," the researchers behind the report noted.

"We find that consumers in all income brackets — including those who make more than $100,000 annually — are living paycheck to paycheck. PYMNTS' research finds that 61% of U.S. consumers were living paycheck to paycheck in April 2022, marking a 9 percentage point increase from 52% in April 2021, meaning that approximately three in five U.S. consumers devote nearly all of their salaries to expenses with little to nothing left over at the end of the month."

Researchers noted that because just over one in three consumers earning $250,000 or more annually who currently live paycheck to paycheck are generally associated with higher credit scores, they have been better able to manage their cash flow through credit cards and other financial products.

"Those earning over $250,000 are 40% more likely to use financial products than consumers in the lowest bracket and as many as 63% of them have above average credit scores, exceeding 750 points," researchers said. "Like many paycheck-to-paycheck consumers, they remain creditworthy and maintain above average credit scores and are apt to tap into credit cards and other payment options, such as personal loans, to manage their cash flows."

Researchers warned that because inflation will likely factor into the foreseeable future, consumers will need to revise their spending patterns.

"Inflation will most likely be part of the economic picture for many months to come, and consumers living paycheck to paycheck of all income brackets will need to review their financial situations and plan their spending accordingly," they concluded.

Speaking on a panel alongside the heads of the European Central Bank and the Bank of England on Wednesday, Federal Reserve Chair Jerome H. Powell said he wasn't yet sure if the pre-pandemic global conditions that kept price increases slow and steady would return.

"We've lived through a period of disinflationary forces around the world," Powell said, according to The New York Times. "Since the pandemic, we've been living in a world where the economy is being driven by very different forces, and we know that. What we don't know is whether we will be going back to something that looks more like, or a little bit like, what we had before."

European Central Bank President Christine Lagarde said inflation in the Eurozone was "undesirably high." She doesn't believe "we are going to go back to that environment" that kept prices low over the past two decades.

Inflation rose above 8% across the Eurozone in May, which is well above the Central Bank's 2% target. In Spain, the annual inflation rate exceeded 10% for the first time since 1985.

"There are forces that have been unleashed as a result of the pandemic, as a result of this massive geopolitical shock that we are facing now ... that are going to change the picture and the landscape within which we operate," Lagarde noted, referencing the war in Ukraine.

Researchers have stated that African Americans who lag behind their white counterparts in income, wealth, financial savings and home ownership are most likely to suffer the most damaging impacts as inflation continues to rise, CNN reported.

"It's going to be extremely devastating," William Darity Jr., a professor of public policy, African American studies and economics at Duke University, told the news network. "People will have to make very, very hard decisions about whether or not to purchase medicines or buy food or forgo payment of their utilities. It will have harsh effects on people's well-being."

Elementary school teacher Krista Johnson, 33, who is pregnant and set to give birth in August, told CNN that she remains worried even though she is packing her husband's lunches, eating out less and doing what she can to save.

"I'm just worried about quality of life," said Johnson. "You already have nerves about being a new parent. And then you have the whole economic downturn possibly coming and it can create some anxiety."

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