Americans' Earnings Decline Across 17 States Amid Economic Uncertainty
NORTH AMERICA
Last year, the poverty rate among people over 65 surged to 14.1%, marking a significant increase from the previous year. This trend is pronounced in states where household incomes experienced a decline, many of which have older populations compared to the national average. New Hampshire, which witnessed the most substantial drop in median household income, has around 20% of its residents aged over 65, compared to the national average of 17%.
Americans find themselves growing increasingly pessimistic about the state of the economy and their own financial well-being. In a recent CBS News poll, more than half of respondents voiced difficulties in managing their expenses. This prevailing pessimism can be attributed to a combination of factors, with inflation eroding the purchasing power of incomes and median household earnings witnessing a decline in 17 U.S. states, as per Census data.
The states where households experienced economic setbacks predominantly reside in the Midwest and Northeast, encompassing pivotal swing states like Michigan, Ohio, and Pennsylvania. While incomes remained statistically stagnant in 29 states, only five states observed measurable improvements in household incomes, according to the latest data furnished by the U.S. Census Bureau.
This localized perspective on economic data potentially offers insights into why many Americans harbor doubts about the overall health of the economy, which, by several indicators, appears robust with a low unemployment rate. However, the most direct barometer of economic well-being – personal earnings – continues to lag. In 2022, the U.S. median household income diminished by 2.3% to $74,580, marking the third consecutive year of income decline.
Households grapple with not only high inflation but also the conclusion of pandemic-related financial assistance programs, including federal stimulus checks and the expanded Child Tax Credit. This has left many grappling with a sense of financial insecurity, as inflation, although receding, remains at elevated levels.
Jesse Wheeler, a senior economist at Morning Consult, points to a complex interplay of factors affecting consumer sentiment. Years of inflation, coupled with concerns about a looming recession and stock market volatility, have collectively contributed to the prevailing economic gloom. Wheeler emphasizes that rebuilding consumer confidence takes time, even when the economy is in better shape than during the onset of the pandemic.
Economic challenges are particularly pronounced in the Midwest and Northeast due to a confluence of factors, such as the impact of inflation on purchasing power, the composition of the labor force, and demographics. For instance, senior citizens, living on fixed incomes, are particularly susceptible to the ravages of inflation. While Social Security benefits are adjusted annually for inflation, critics argue that these adjustments fall short of keeping pace with rising living costs.
Last year, the poverty rate among people over 65 surged to 14.1%, marking a significant increase from the previous year. This trend is pronounced in states where household incomes experienced a decline, many of which have older populations compared to the national average. New Hampshire, which witnessed the most substantial drop in median household income, has around 20% of its residents aged over 65, compared to the national average of 17%.
Though consumer sentiment continues to reflect widespread unease, state-level sentiment trends display some correlations with median household income data, although the correspondence is not direct. Several states that saw increases in real median incomes, such as Delaware, Alabama, Alaska, and Utah, experienced only minor declines in consumer confidence. Alaska, the sole state to record a surge in consumer sentiment, also reported the second-highest gain in household income last year.
The prospect of improved household incomes in 2023 is feasible, primarily due to wage growth finally outpacing inflation. Nevertheless, Jesse Wheeler acknowledges that higher interest rates and the resumption of student loan repayments could potentially strain budgets for many households.