60% of Americans are still living paycheck to paycheck as inflation hits workers’ wages

Personal finance

After a prolonged period of high inflation and higher interest rates, Americans are just getting by.

As of August, 60% of adults said they are living paycheck to paycheck, according to a new LendingClub report, unchanged from last year.

Recent data is painting a mixed picture of where the economy stands. Inflation has shown some signs of cooling but the consumer price index, which measures costs across a broad array of goods and services, is still up 3.7% from a year ago, according to the U.S. Bureau of Labor Statistics’ August reading.

Those higher prices have weighed on worker paychecks. Real average hourly earnings declined 0.5% for the month, the U.S. Department of Labor said in a separate release.

More from Personal Finance:
Money market funds vs high-yield savings accounts
Women will accept much lower salaries than men
Homeowners say 5% is the magic number to move

Since wage growth hasn’t been able to keep up, households are having a harder time making ends meet.

“The data underscores the pervasive nature of financial challenges affecting a majority of consumers,” said Alia Dudum, LendingClub’s money expert. “The problem is that there is more month at the end of the money.”

The Federal Reserve left interest rates unchanged at the end of its most recent policy meeting but Fed Chair Jerome Powell said the central bank would like to see more progress in its fight against inflation, leaving open the possibility of another interest rate increase this year.

Central bank officials have already raised rates 11 times, pushing the Fed’s key interest rate to a target range of 5.25% to 5.5%, the highest level in more than 22 years. 

Four out of five consumers’ spending habits have been affected by inflation, according to TD Bank’s annual consumer spending index.

Soaring housing, food and child-care costs are putting pressure on household budgets on top of paying higher interest rates on credit card debt and auto loan payments, said Sophia Bera Daigle, CEO and founder of Gen Y Planning, an Austin, Texas-based financial planning firm.

Monthly expenses are “starting to hurt,” said Bera Daigle, who is also a member of the CNBC’s Advisor Council.

Lower-income workers have been the hardest hit by higher prices, particularly for food and other necessities, since those expenses account for a bigger share of the budget, studies show.

Now, 76% of consumers earning less than $50,000 a year and 62% of those earning between $50,000 and $100,000 were living paycheck to paycheck in July, little changed from a year ago, LendingClub found. Of those earning $100,000 or more, only 45% reported living paycheck to paycheck. 

70% of Americans are stressed about finances

Some 70% of Americans admit to being stressed about finances, according to a separate CNBC Your Money Financial Confidence Survey conducted in March, largely due to inflation, rising interest rates and a lack of savings.

Only 45% of adults said they have an emergency fund. For those who do have emergency savings, about 26% polled said they have less than $5,000 saved.

That survey found that 58% of Americans are living paycheck to paycheck.

Subscribe to CNBC on YouTube.

Articles You May Like

Top Wall Street analysts recommend these stocks for a long-term horizon
Can money buy happiness? 60% of Americans say yes — and the price tag is $1.2 million
Now that federal student loan payments have resumed, here’s what to consider before refinancing
Why cautious investors may want to look beyond high-yield savings accounts
Money tips for single moms: ‘It can be very challenging to raise kids on one income,’ advisor says