The Federal Reserve released its Economic Well-Being of US Households report for 2023, revealing that nearly two-thirds of US adults were worse off due to inflation. While 72% of adults said they were financially stable, this was lower than the previous year and significantly below the high of 78% in 2021. Inflation negatively impacted 65% of households, with 19% reporting that it made their financial situation “much worse.”
The Survey of Household Economics and Decisionmaking by the Fed looked at various aspects of Americans’ economic health, such as employment, income, banking, credit, housing, retirement planning, and more. Despite positive economic indicators such as job growth and wage increases, many Americans continued to struggle due to three-plus years of high inflation. In 2022, inflation peaked at 9.1%, leading to financial challenges for many individuals and families.
While incomes increased in 2023, so did spending, resulting in many adults having tight monthly budgets. More than half of adults did not have any money left after paying their bills, particularly impacting lower-income adults who reported difficulties with essentials like food, bills, and medical care. Overall, 17% of adults surveyed said they could not pay all their bills in full the month before the survey was conducted.
Governor Michelle Bowman highlighted the importance of the Survey of Household Economics and Decisionmaking for understanding how American households are managing economic challenges. While perceptions of the local economy improved slightly compared to the previous year, they were still lower than pre-pandemic levels. Similarly, perceptions of the national economy also showed improvement but fell short of pre-pandemic sentiments.
Financial resiliency measures remained relatively stable, with 63% of adults reporting they could cover a $400 emergency expense with cash on hand. However, parents living with children under 18 saw a significant decline in financial well-being, with child care expenses being a major concern in 2023. The report also highlighted issues like homeowners’ insurance, food sufficiency, and caregiving responsibilities as factors impacting financial stability.
The report also discussed the impact of natural disasters on homeowners’ insurance coverage, revealing that individuals at higher risk of financial impact from such events were less likely to be insured. Nearly a quarter of homeowners in the South earning under $50,000 a year did not have homeowners’ insurance. Overall, while some economic indicators showed improvement, many Americans continued to face financial challenges, with inflation being a major factor affecting their well-being.
