Higher prices have negatively affected most households and overall financial well-being in 2022 declined over the prior year, though workers continued to benefit from a strong labor market, according to a report issued Monday by the Federal Reserve.
In its Economic Well-Being of U.S. Households in 2022, which the Fed said examines the financial lives of U.S. adults and their families, the agency said self-reported financial well-being declined last year, partly reflecting ongoing concerns about higher prices. “In the fourth quarter of 2022, 73% of adults reported either doing okay or living comfortably financially,” the report stated, noting that’s down 5 percentage points from 2021 “and among the lowest levels observed since 2016.”
The report also notes that fewer adults in 2022 reported having money left over after paying expenses. The report stated that 54% of adults said that their budgets had been affected “a lot” by price increases. Parents living with children under age 18, Black adults, Hispanic adults, and those with a disability were more likely to say that their budgets had been affected “a lot” by higher prices, according to the report.
In responding to higher prices, the report said a most common strategy for a consumer was to use less of a product or stop using it altogether. Other strategies included switching to a cheaper product, delaying a major purchase or tapping their savings to finance purchases (which was reported by 51% of adults).
As for new jobs and pay increases, compared to 2021, the report offered a more optimistic view. The share of workers who received a raise, asked for a raise, or voluntarily left a job increased since 2021, the report stated, while the share who lost a job decreased. “For example, 33% percent of adults said they received a raise or promotion in the prior year, up 3 percentage points from 2021,” the report noted.
Still, there has been an erosion in adults’ financial readiness to deal with an emergency. The report stated that the share of adults who reported they could cover a $400 emergency expense with cash or equivalent was 63% – but that’s down five points from a high recorded in 2021.
However, 13% of adults said they would be unable pay the expense by any method, which was slightly higher than the previous survey.
The report issued Monday draws from the Fed’s 10th annual Survey of Household Economics and Decisionmaking (SHED), which was conducted in October. It included responses from more than 11,000 adults, the Fed said.