The U.S. economy is strained to the point of breaking Americans' budgets, and this week's releases of consumer and producer inflation data showed that the pain being felt by American families and U.S. companies isn't going to ease up soon.
As a result of steadily rising inflation that kicked off just after President Biden took office and has so far reached and stayed in 40-year high territory — including repeated all-time records set for fuel prices — Americans' budgets are being stretched to the breaking point and then some.
That's because, even as wage growth is trending higher — around five percent over last year — the eight-plus percent consumer inflation means Americans' real wages are actually three percent lower than twelve months ago.
As CNBC points out:
When wages rise at a slower pace than inflation, those paychecks won’t go as far at the grocery store and at the gas pump — two areas of the budget that have been particularly squeezed.
As of March, close to two-thirds, or 64%, of the U.S. population was living paycheck to paycheck, just shy of the high of 65% in 2020, according to a LendingClub report.
“The number of people living paycheck to paycheck today is reminiscent of the early days of the pandemic and it has become the dominant lifestyle across income brackets,” said Anuj Nayar, LendingClub’s financial health officer.
The growing number of Americans finding their income unable to keep up with inflated costs is forcing them to take on new debt, mainly through credit cards. As CNBC added of the survey showing a significant majority of Americans struggling to make ends meet, those "who are struggling to afford their day-to-day lifestyle tend to rely more on credit cards and carry higher monthly balances making them financially vulnerable." According to another survey from the Federal Reserve Bank of New York cited by CNBC, "credit card balances rose year over year, reaching $841 billion in the first three months of 2022."
Two-thirds of Americans are living paycheck to paycheck as inflation continues to climb. https://t.co/6CJ9QYXWnD— CNBC (@CNBC) May 12, 2022
Furthering endangering the fragile financial position of many Americans is the Fed's recent decision to raise interest rates, a move that will see Americans turning to credit cards to make ends meet in between paychecks facing faster-accumulating debt on their balances.
Meanwhile, the Biden administration has referred to inflation as "transitory," endorsed the view that inflation is only a "high-class problem," and most recently saw President Biden clapping like a seal and laughing while Trevor Noah joked about the rising cost of goods putting Americans in financial turmoil.