At sunrise, Patrice Stinney prepares lattes in a café. At dusk, she scurries around Phoenix Sky Harbor International Airport as an airline customer service representative.
In her “free time” Stinney is also a part-time hairstylist and aspires to own a beauty salon. But she recently moved in with her older brother and gave up her four-year-old apartment because of a rent increase. Despite working three jobs, Stinney struggles to make ends meet.
“Everything costs so much. Food is expensive. Gasoline is expensive. It’s really hard for me,” said Stinney, 40, of Goodyear, Arizona, after a recent 14-hour workday. “I can only imagine what people with families and children have to go through.”
As Americans look ahead to another Independence Day and a likely contentious presidential election in 2024, many are feeling the pinch financially as the prices of food, shelter, health care and transportation soar faster than their paychecks. About 52% of Americans who participated in a USA TODAY/Suffolk poll said the United States is too expensive to live in. And about 7 in 10 Americans said oppressive inflation and the economy are the country’s biggest problems today, according to a new Pew Center poll. A majority of all ages, genders and races told Pew that inflation is “a very big problem.”
“Their purchasing power has been minimized,” said Gene Ludwig, former head of the Comptroller of the Currency, an agency of the US Treasury Department.
America’s economic situation is uncertain
What is America’s economic situation? Frustrating and insecure. The typical American household is spending about $768 more a month on goods and services today than it did in 2020 due to high inflation, said Mark Zandi, chief economist at Moody’s Analytics.
While the United States is now escaping a recession, some Americans seeking relief are also turning to their savings to survive, according to Zandi. According to a recent data analysis by Moody’s/Equifax, approximately 25 million Americans are behind on their credit card, auto loan, or personal loan payments. Also, the default rate for bank credit cards was 3.27% in May, nearly two percentage points higher than in 2021, Zandi said.
“The economy is struggling because of these ongoing struggles,” said Zandi, who gave the US economy a B-minus rating. “If you ask the typical American, I think they’re uncomfortable. The good news is that many people are still in work and wage growth is solid, but that’s not enough to make us feel comfortable spending more on basic necessities.”
Economists estimate the US economy is trying to find a “better balance”.
Zandi’s theories echo a Brookings study this month conducted by former Federal Reserve Chairman Ben Bernake and former International Monetary Fund chief economist Olivier Blanchard, entitled “What Caused Inflation in the US Pandemic Era?” .
They wrote that the Fed and many forecasters did not anticipate “mismatches” from a strong job market as interest rates surged. “Taken together, at given wages, these price shocks would prove to be the key drivers of rising inflation,” the economists said. Bernake and Blanchard said cutting the current inflation rate from 4.05% to the Fed’s preferred target of 2% requires a better balance.
Ludwig, the former comptroller, said the Fed has relied on inflation data like CPI for too long to accurately gauge the impact of the country’s economy.
“We need to find new tools to curb inflation because when you raise interest rates, it’s low- and middle-income Americans who suffer the most,” Ludwig said. “It’s disproportionately painful and unfair.”
First-time owners struggle to buy a home
Demand for housing remains strong in the United States, but the market has cooled since the pandemic-driven sales boom in 2020 due to high 6% mortgage rates and inflation. As many Americans look to homeownership as a traditional route to wealth creation, fears of banking sector instability, rising concerns about job layoffs and a possible economic recession are causing the gridlock to widen as homebuyers are reluctant to buy and owners reluctant to sell.
Add to that a small inventory of affordable homes and the future looks bleak, especially for potential first-time homeowners. According to a survey by real estate company Truehold, around 75% of Gen Xers, 80% of Millennials and 66% of Gen Zers advise against buying a home under these conditions.
“The market is recalibrating,” said Bess Freedman, CEO of New York City real estate firm Brown Harris Stevens. “We are thirsty for housing.”
Converting vacant offices, schools and malls into housing could be a potential solution, said Jessica Lautz, deputy chief economist for the National Association of Realtors. It’s still a “seller’s market” as the rate of first-time home buyers is currently at a 41-year low, Lautz said.
Better days for the US economy?
Better economic days could be ahead. The University of Michigan consumer sentiment index rose to 63.9% in June, compared to 59.2% in May, the lowest since November 2022.
Consumer Sentiment: This is how Americans feel about their finances and the economy, and what companies use to measure the impact of their brands, is also 28% above the historic low of a year ago and “its uptrend” could be accelerating, said Joanne Hsu, director of consumer surveys at the University of Michigan. Overall, “sentiment remains low.” “A majority of consumers still expect tough economic times next year,” Hsu said.
Although Zandi doesn’t expect a recession this year, Americans still need to adjust to this new reality, he said. “We need to become more price conscious and look for bargains and offers,” Zandi said. “Then businesses will become more aware as you and I become more prudent and prudent in your price increases.”
When Stinney’s rent skyrocketed, she moved instead of giving up basic necessities like her car and phone. Both had to work additional shifts in an already strenuous 70-hour week.
“If I have my eyes open, I’m usually working,” Stinney said as she drove home from her job at the airport late Sunday. She prays she can save money by staying with her family for now. She plans to hit the road again on her own in maybe six months to a year.
“I have to make it. “Must do,” Stinney said. “I do not have another choice.”
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