Americans battered by inflation are 'spending more money than they're earning': report

Americans battered by inflation are 'spending more money than they're earning': report
Economy

During the Joe Biden era, the United States has had some of its lowest unemployment rates in more than half a century — a fact that liberal economist Paul Krugman has often emphasized in his New York Times column. Biden, Krugman wrote in a September 5, 2022 column, has “presided over a huge employment boom.”

U.S. unemployment remained low when 2022 was coming to a close; according to the U.S. Bureau of Labor Statistics (BLS), unemployment in the U.S. was 3.5 percent in December 2022. But unemployment figures don’t tell the whole story. They are a reflection of how many people are working versus how many people aren’t working, but they don’t take into account how much employed Americans are making versus what their expenses are.

Reporting for Axios in an article published on January 18, journalist Emily Peck takes a look at the problem of Americans who — thanks to inflation — aren’t making enough to adequately cover their expenses.

READ MORE:Wages are dampening inflation, not supercharging it

“Overall consumer spending fell 4.3 percent in December from the previous month, according to a Morning Consult survey released Wednesday morning, (January 18), with an increasing share of Americans spending more money than they're earning,” Peck explains. “Why it matters: Inflation may be easing, but high prices are still a big problem for individuals, particularly after a year of spending down savings. It's not a great sign for economic growth.”

Americans who are having a hard time balancing their budgets respond in a variety of ways, some of which are worse than others. One is taking on credit card debt. Others range from cutting back on spending to dipping into one’s savings.

Cutting back on unnecessary spending — for example, cooking at home instead of going out to dinner — is one thing. When Americans start rationing their blood pressure medicine, however, that’s a dangerous situation. Another problem is that too many Americans aren’t saving enough.

According to Peck, “shoppers” in the U.S. “are increasingly making tradeoffs” thanks to inflation.

READ MORE: Inside the corporate lobbying 'onslaught' that tanked anti-price gouging bills as inflation surged

“In order to afford rising food prices at home — up 12 percent, per the latest CPI — households cut back on restaurant spending by 8 percent, Morning Consult found,” Peck reports. “Rising prices, particularly for food and shelter, are hitting the lowest-income earners the hardest. But more affluent Americans are feeling the pinch, too. Twenty-eight percent of those earning less than $50,000 said expenses outweighed their income in December — a big jump from 21 percent last year. Nine percent of those earning more than $100,000 a year said the same, up from 7 percent last December.”

Peck notes that in 2022, “consumer spending held up even as inflation soared, thanks partly to built-up savings.” She adds, however that “consumers” are “now running out of gas” because “paychecks haven't kept up with inflation.”

Kayla Bruun, an economic analyst for Morning Consult, told Axios, “That spending is finally coming down isn't too surprising. The more surprising thing was how well it held up in 2022.”

READ MORE: Watch: Chart-armed Katie Porter proves that corporate greed is the primary cause of inflation

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