Mon, 30 January 2023 | consumers economy
A new survey from Lending Club and PYMTS found that 64% of U.S. consumers (166 million) lived paycheck to paycheck in December 2022, up 3 percentage points from 61% the year before. Higher income categories had the largest rise. In reality, 9.3 million more customers live paycheck to paycheck, while eight million, or 86%, earn above $100,000.
51% of consumers earning over $100,000 lived paycheck to paycheck in December 2022, up 9 percentage points from 42% in December 2021. As of December 2022, 66% and 78% of middle-income consumers (those earning between $50,000 and $100,000 yearly) and low-income consumers (those earning less than $50,000 annually) have stayed essentially stable.
According to the research, more customers earning over $100,000 are living paycheck to paycheck and having trouble paying their obligations. In December 2022, 16% of high-income paycheck-to-paycheck consumers struggled to pay their bills, up from 11% in 2021.
"Inflation is eating into every American's pocketbook and as the Fed's efforts to limit inflation drive up the cost of debt, we are witnessing near record numbers of Americans living paycheck to paycheck," said LendingClub financial health officer Anuj Nayar. "While the amount of Americans living paycheck to paycheck is similar to the height we reached in the middle of the epidemic, the causes appear to be very different, as the economy is not sheltering in place like it was in 2020."
2023 Consumer Sentiment
2023 paycheck-to-paycheck consumers are hopeful about their finances but scared about inflation. The report found that 41% expect their personal finances to increase in the coming year, up from 33% in July 2022. Paycheck-to-paycheck consumers are also most likely to attribute financial gain in the coming year to job enhancements (more than 25%) and higher income (nearly 30%).
Inflation worries paycheck-to-paycheck customers who expect their finances to worsen next year, while economic uncertainty worries those who aren't. Three-quarters of paycheck-to-paycheck consumers blame inflation and two-thirds blame economic uncertainty for their pessimism. 72% of non-paycheck consumers worry about economic uncertainty, compared to 62% for inflation.
Despite pessimism, four in 10 paycheck-to-paycheck consumers expect their salaries to stay pace with inflation in 2023. However, 90% of wage-earners say their 2022 pay increases were lost to inflation, and only 42% expect 2023 pay increases to offset price hikes.
In 2023, inflationary pressures may deter people from buying electronics and appliances. Leisure travel may also wane this year. In 2023, 35% of customers will spend money on leisure vacation, while 24% will buy pricey equipment or appliances.
"If the consumer assumption that their salaries will rise this year is proven accurate, it will limit the impact of the Fed to curb inflationary pressures," said Nayar. "Until the economy recovers, more Americans of all incomes will say they live paycheck to paycheck. Consumers must review spending and save for the unexpected now more than ever."