Many business reports say that the economy is improving, that inflation is being brought under control, and that the federal deficit will be slashed. These are very reassuring, but they also raise important questions. For one, if the economy really is getting better, why are so many middle-class people trapped in a web of financial pressure? And, as important, why can’t middle class people save money?
Rising inflation is the issue most talked about. In 2022, the Consumer Price Index (CPI) hit a 41-year high when it surged by more than 9%. While there’s no question that inflation has cooled somewhat since then, there’s also no question it’s still a problem. On the bottom line, many Americans, ranging from highly regarded economists to ordinary consumers, agree there is a lot of economic pain out there.
One of them is Mark Kritzman, a senior lecturer at the Massachusetts Institute of Technology’s Sloan School of Management. Kritzman was quoted by The Epoch Times, saying that “Our research shows mathematically that the overwhelming driver of that burst of inflation in 2022 was federal spending, not the supply chain.” This conclusion is worrisome because federal spending continues to skyrocket.
Lies, Darned Lies, And Statistics
“Many attribute (their economic difficulties) to stagnant wages and higher prices for things like gas, groceries and utilities which began in 2021 and persist to this day,” according to The Epoch Times. “Americans aren’t seeing price adjustments in areas like grocery prices, housing costs, utility bills and insurance.” In other words, even though the statistics say things are improving, in reality they are not.
The manager of one small business in New Jersey described her situation this way: “My household, like many others, has felt the impact in areas like health care and housing…Many of my peers cite similar experiences, struggling to save amid these increasing costs.”
Others have expressed very similar concerns. One of them is David Kindness, a CPA and finance writer at Best Money, who lamented that rising wages are not keeping up with increasing costs. “Even with inflation cooling in certain areas, essential goods and services remain stubbornly expensive, eating up larger chunks of household budgets,” he said. “Rising grocery bills have made weekly shopping trips a source of financial stress.”
Typical, But Troubling
The expression “living paycheck-to-paycheck” has not only caught on, but is one that many people identify with strongly. One explanation as to why this is happening is evident in a very recent survey taken by the World Economic Forum (WEF). Results of that survey indicate business leaders around the world are worried about the federal deficit, developing labor shortages, and rising inflation, and it appears many other people are too.
Business leaders form their theories and conclusions on based on statistics, economic policies and related data. But ordinary people also form opinions. True, their approach is less scientific, but it’s also more hands-on. For example, they track how long their paychecks last, how many purchases they are forced to make on credit cards, and how much money – if any – they can save from each paycheck.
And they are not optimistic. In August, about 60% of Americans believed the U.S. was already in a recession, according to the financial technology company Affirm. And more recently, in October, a Gallup poll found that more than half of Americans said they were worse off than they were four years ago.
Financial planner and founder of Imax Credit Repair Ali Zane suggested this explanation for the “paycheck to paycheck” phenomenon. “One of the most overlooked statistics is the disconnect between wage growth and the actual cost of living,” he said. “While inflation is blamed, stagnant wages over the past two decades are the root issue. Salaries may be inching upward, but housing prices, which rose 30% - 40% in many regions since 2020 have far outpaced them. Add to the mix the relentless climb of healthcare premiums and childcare expenses, and it’s no wonder families feel financially strapped.”
Since January 2021 prices have risen 20%, while wages have increased just 17.4% according to Bankrate’s second annual Wage To Inflation Index.
Numbers Can Speak
Insights and theories help explain the economic distress, but statistics are more to the point, and in this case, they also pack more of a punch. Consider the following:
*October was the 53rd straight month that core consumer prices rose on a month over month basis. And year over year, their pace of increase accelerated to 3.33%.
*USA Today reported that a Bank of America (BoA) survey found that the “share of consumers who said they lived from paycheck to paycheck has gradually risen from about 35% in early 2022 to 47% in the third quarter of 2024.”
*According to real estate firm Redfin, more than one in five U.S. renters said that they used all of their income to pay their rent. And 20% reported that they needed to work at a second job in order to make those payments.
*Many people are forced to borrow very heavily to pay for essentials. According to the New York Federal Reserve, total credit card debt at the quarter ending in September reached another all-time high of $1.17 trillion. This was an increase of $24 billion from the previous quarter.
*In October, a BofA study found “that the number of households barely making it between paychecks has increased across every income bracket since 2019, including those making more than $150,000 per year.” And almost half of all respondents felt they were living under this financial pressure.
*Producer Price Inflation was “red hot” in November, the hottest since Fed. 2023. Moreover, the U.S. budget deficit this fiscal year was off to its worst start ever. In the first two months alone (October and November) it soared by a record $624 billion. In addition, jobless claims exploded in the first week of December and consumer prices in November surged the most since April.
Statistics like these help explain why people are feeling so financially pressured. But we still need to figure out what to do about it. Trump will certainly address these issues when he is sworn in on Jan. 20, and all of us should hope he can figure out a way to stop the hurt.
Sources: affirm.com; foxbusiness.com; redfin.com; theepochtimes.com; usatoday.com; theeconomiccollapseblog.com; zerohedge.com
Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.