Americans are feeling fairly secure in their jobs and expect to continue earning and spending more than they did pre-pandemic, according to new survey data released by the Federal Reserve Bank of New York. However, they are increasingly anxious about mounting credit card debt, as debt balances have been growing and consumers are nervous about being able to keep up with payments. The average perceived probability of missing a minimum debt payment in the next three months has increased for the fourth consecutive month to 14.2%, the highest delinquency expectation reading seen in the survey since 2017.
The juxtaposition seen in the latest New York Fed survey reflects a trend observed in other data, where the US economy is strong but consumers do not feel great about it. Inflation remains a significant concern, despite recent decreases, and is impacting the gains people are making. The cumulative effects of high inflation have hit some Americans harder than others, contributing to growing income inequality. Those with good incomes and credit scores are faring well, while lower-income individuals are struggling more with higher inflation and potential credit card debt.
Research shows that lower-income Americans are facing higher inflation compared to higher-income households, with prices rising 64% for the lowest-income households since 2005 compared to 57% for the highest-income households. The latest New York Fed data reveals that delinquency expectations did spike higher for people earning over $100,000 per year, increasing from 6.4% to 8.4%. However, for those earning less than $50,000 a year, the probability of an expected missed payment increased to 20%, highlighting the challenges faced by lower-income individuals in managing their debts in the current economic environment.
Overall, the US economy is performing well, but consumer sentiment is not as positive due to concerns about inflation and mounting debt levels. Inflation continues to be a dominant theme in the economy, with many feeling that the gains they are making are being eroded by rising prices. Income inequality is also a growing concern, with those with higher incomes and better credit scores faring better than those with lower incomes. These trends are reflected in the increasing anxiety surrounding credit card debt and the perceived probability of missing minimum debt payments in the coming months.
Despite the strong economy, Americans are growing increasingly worried about their financial stability and ability to keep up with debt payments. The latest survey data from the New York Fed highlights these concerns, showing a rise in delinquency expectations and a growing divide between higher and lower-income households. As inflation remains a key concern and people struggle to make ends meet, it is important for policymakers and financial institutions to address these challenges and provide support for those who are most affected. By understanding the factors contributing to these issues, steps can be taken to address income inequality and reduce financial stress for all Americans.
