A growing number of Americans say they are struggling with their finances, according to a new Federal Reserve report revealing the toll that inflation has taken on U.S. households over the past year.
Some 73% of adults were "doing at least OK financially" as of October 2022, down five percentage points from a year earlier. The 2022 percentage is among the lowest since 2016, according to the Fed's annual Survey of Household Economics and Decisionmaking, which was published on Monday.
The survey examined the financial situation of more than 11,000 adults and their families in the U.S. The inflation rate surged to a 40-year high in mid-2022, squeezing American households to a degree that hadn't been seen since the 1980s. Since then, inflation has receded, though it remains well above its pre-pandemic pace.
"Overall, the report shows that higher prices have negatively affected most households," the Fed said in a statement accompanying the release. "Overall financial well-being declined over the prior year, though workers continued to benefit from a strong labor market."
Nearly a quarter of respondents said that while their spending had increased in 2022, their incomes had not. Roughly two-thirds said they stopped using a product or used less of it because of higher prices, while 51% said they cut back on their savings. About 28% reported going without some form of medical care in the last year because they couldn't afford it.
All racial and ethnic groups polled in the survey saw a decline in financial well-being from a year earlier. And among income groups, those earning $25,000-$99,999 saw the largest declines in well-being. Only 65% of adults identifying as LGBTQ+ said they were doing at least OK financially, well below the 75% share for those not identifying as LGBTQ+. For people with disabilities, the share doing at least OK was just 56%.
One silver lining from Monday's report was the benefit of a strong labor market. The unemployment rate in April fell to 3.4% and wage growth remained elevated, according to monthly Labor Department figures. One-third of adults in the survey said they received a raise or promotion in the prior year, up three percentage points from 2021. And among those who asked for a raise last year, 70% of respondents said they had received one.
Still, only 63% of adults surveyed said they could cover an unexpected $400 expense using cash or its equivalent, down from 68% the year before. Many said they would lean on credit cards or family members to manage such a bill. About 13% said they wouldn't be able to cover such an expense by any means.
The share of Americans voicing confidence in their retirement preparedness also fell, with 31% of non-retirees reporting their savings were on track — down from 40% in 2021 and less than in 2018, 2019 and 2020.
