The Federal Reserve’s 2023 Economic Well-Being of US Households report revealed that inflation had a negative impact on nearly two-thirds of American adults, with 1 in 6 unable to pay all their monthly bills. While 72% of adults reported being financially stable, a decrease from previous years, 65% said their financial situation had worsened due to inflation. This data was collected from the Fed’s Survey of Household Economics and Decisionmaking, which examines various aspects of Americans’ financial health, including income, spending, and ability to cover expenses.
Despite positive overall economic indicators such as job growth and pay increases leading to increased consumer spending, high inflation rates over the past three years have had a significant impact on Americans’ financial well-being and overall outlook. In 2022, inflation hit 9.1%, the highest in over 40 years, and while it has since decreased to 3.4%, many households continue to struggle with tight monthly budgets and insufficient funds to cover expenses.
The report also highlighted disparities in financial resilience among different income groups, with lower-income adults more likely to report struggling to cover bills, skipping necessary medical care, and lacking food security. Seventeen percent of adults surveyed admitted they could not pay all their bills in full the month prior to the survey, conducted in October 2023. Fed Governor Michelle Bowman emphasized the importance of understanding these challenges to better address the economic needs of American families.
While perceptions of local and national economies saw slight improvements from the previous year, they remain below pre-pandemic levels. Forty-two percent of respondents viewed their local economy positively, though this is lower than the 63% reported in 2019. Similarly, only 22% believed the national economy was doing well, compared to 50% before the pandemic. Despite these challenges, 63% of adults reported being able to cover a $400 emergency expense with cash, a promising sign of financial preparedness.
One notable decline in financial well-being was seen among parents with children under 18, with only 64% reporting they were “doing okay” in 2023, down from 75% in 2021. Child care expenses were a significant burden for these families, often amounting to 50-70% of their monthly housing costs. The report also addressed new topics such as homeowners’ insurance, food sufficiency, and caregiving responsibilities. It found that homeowners in high-risk areas were less likely to have insurance, with almost 25% of those in the South earning under $50,000 a year lacking coverage.
Overall, the 2023 Fed report highlighted the ongoing challenges faced by American households due to inflation, tight budgets, and disparities in financial resilience. While some positive indicators like job growth and income increases were noted, many families continue to struggle to make ends meet. Addressing these issues and understanding the unique challenges faced by different demographic groups will be crucial in improving economic stability and well-being for all Americans.
