Personal Finance

Unrelenting inflation is driving up costs, leaving more Americans living paycheck to paycheck

Key Points
  • With no break in sight for rising prices, nearly two-thirds of all Americans are living paycheck to paycheck, according to a recent report.
  • Even top earners say they are stretched thin, the report found.
  • Over one month, average savings dropped from $11,274 in May to $10,757 in June.

In this article

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What is inflation and what causes it?

Inflation has been causing economic hardship for workers across all income levels.

As of June, 61% of Americans — roughly 157 million adults — lived paycheck to paycheck, according to a new LendingClub report. That's up from 58% who reported living paycheck to paycheck in May. A year ago, the number of adults who felt stretched too thin was 55%.

Even top earners have been struggling to make ends meet, the report found. Of those earning $200,000 or more, 36% reported living paycheck to paycheck, a jump from the previous month. 

Another recent survey, from consulting firm Willis Towers Watson, estimated 36% of those earning $100,000 or more said they were living paycheck to paycheck.

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Inflation has been an ongoing problem

Although average hourly earnings are up 5.1% from a year ago, prices have been rising even faster, especially for groceries and — until quite recently — gasoline, so paychecks can't stretch as far.

The Consumer Price Index, which measures the average change in prices for consumer goods and services, jumped a higher-than-expected 9.1% in June, the fastest pace since 1981.

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Another key inflation gauge, the Personal Consumption Expenditures Price Index, which measures the price change in goods and services consumed by all households, also jumped 6.8%, the biggest 12-month move since 1982.

Taken together, this data shows Americans are shelling out more to cover their monthly expenses, making it increasingly difficult to make ends meet. As a result, they're dipping into their cash reserves and nearly half are falling deeper in debt.

Among all consumers, average savings dropped to $10,757 in June from $11,274 in May, LendingClub also found.

Those struggling to afford their day-to-day lifestyle tend to rely more on credit cards and carry a higher monthly balance, making them financially vulnerable, the survey said.

For its part, the Federal Reserve hiked its target federal funds rate by 0.75 percentage point a second consecutive time in an effort to calm runaway inflation.

The central bank has indicated even more increases are coming until inflation shows clear signs of a pullback.

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