How are you feeling about your financial situation right now?
Half of Americans say they are doing worse financially now than they were a year ago. That’s the highest share since 2009, according to the latest annual poll from Gallup. But not everyone is feeling the pinch, with 35% saying they are better off compared with a year ago.
“Since Gallup first asked this question in 1976, it has been rare for half or more of Americans to say they are worse off. The only other times this occurred was during the Great Recession era in 2008 and 2009,” the report said.
High inflation, rising interest rates and a bearish stock market in 2022 all took a toll on Americans’ finances — and on their feeling of economic security.
The number of Americans who applied for unemployment benefits in early February rose by 13,000 to a total of 196,000, the government said Thursday. However, that number is still hovering near pandemic-era lows.
“Lower-income Americans and Republicans were more likely to say their finances had deteriorated over the past year.”
Pandemic-induced supply-chain disruptions and Russia’s invasion of Ukraine have also pushed up the prices of energy and food. The annual increase in the consumer-price index was 6.6% in December, cooling from a 40-year high of 9% in June 2022.
Across all income levels, lower-income Americans — defined as households earning less than $40,000 a year — were more likely to say their finances have deteriorated. Some 61% of lower-income Americans said their financial situation has worsened in the past year, compared with 26% who said it has improved and 11% who said it stayed the same.
More Republicans than Democrats said their finances are worse now, with 61% of Republicans and 37% of Democrats saying they are worse off than they were last year. This, political commentators note, likely reflects respondents’ support for the party occupying the White House.
Pandemic-era government benefits come to an end
Many people are facing a double whammy as households lose a raft of pandemic-era government benefits and prices continue to rise.
Enhanced child tax credits, which helped many parents during the pandemic, expired last year.
And an expanded version of the Supplemental Nutrition Assistance Program (SNAP) tied to the public health emergency will come to an end on Feb. 28 in most states. More than 15 states, including Alaska and Tennessee, have already put an end to these so-called emergency allotments.
High interest rates, credit-card debt and a bearish stock market
High prices, meanwhile, have driven more Americans to rely on credit cards. Credit-card balances hit a record high of $931 billion in the last quarter of 2022, up 18.5% from the previous year, according to a TransUnion TRU,
And because the Federal Reserve hiked its benchmark interest rate seven times in 2022 in an effort to combat inflation, it is now more expensive to borrow money and to pay off debt. After another increase of 25 basis points last week, the federal-funds rate is currently 4.5% to 4.75%, the highest since October 2007.
In 2022, all three major stock indexes suffered their worst year since 2008 based on percentage declines. The Dow Jones Industrial Average DJIA,
But despite feeling worse off than last year, the majority of Americans — 60% — say they remain optimistic about the year ahead, the Gallup report indicated.
“If this optimism holds and consumers act accordingly, it may help to minimize or avert an economic recession,” the authors wrote.