There are some US economists who believe that people should feel good about the US economy because of the following statistics. They are disconnected or are willfully ignoring what people are experiencing.
In 2019 and 2020, 18% of those earning over $100,000 were living paycheck to paycheck.
In October, 2023, according to CNBC, while three-quarters of individuals earning $50,000 or less are living paycheck to paycheck, 65% of those earning $50,000 to $100,000 are in the same predicament. Of those earning $100,000 or more, 45% reported living paycheck to paycheck.
Lending Tree survey from late in 2022, indicated that one third of people earning over $250,000 are living paycheck to paycheck. According to a 2022 survey by Pymnts.com and LendingClub, 36% of people earning $250,000 or more live paycheck to paycheck.
In 2024, twice the percentage of people making over $250,000 per year are living paycheck to paycheck (36%) than percentage living paycheck to paycheck with $100,000 in earnings in 2019 (18%).
The direct comparison of paycheck to paycheck percentages for those making over $100,000 was 18% in 2019 and is now $45%.
The amount of credit card debt is now over $1 trillion as the paycheck to paycheck is not enough to meet expenses.
More income is required to rent. The median person must make $79,264 to afford rent — paying about 30% of income. That’s an increase of 40.6% since the start of the pandemic. Single-family home rentals, prices grew 35.7% since early 2020.
steepest increases last year, but still going up pic.twitter.com/9RzD7R6VVv
— nextbigfuture (@nextbigfuture) January 29, 2024
One Year price increases (from Dec 2022 to Dec 2023)
Frozen noncarbonated juices and drinks (+19.1%).
Food from vending machines and mobile vendors (+13.1%).
Beef and veal (+8.7%).
5% increases at restaurants.
Job Losses Incoming for 2024
A Dec, 2023, Congressional Budget Office (CBO) report forecasts a rise in U.S. unemployment from the current 3.9 percent to 4.4 percent by the end of 2024, signaling potential job losses for millions amidst a contracting gross domestic product (GDP).
The projected increase in unemployment, affecting an estimated 7.4 million Americans within the workforce, will come amidst economic adjustments and policy shifts, the CBO said in its “Current View of the Economy From 2023 to 2025” report.
Will the CBO have made an optimistic projection ?
The Sept, 2023, Federal Reserve forecast was that inflation would be at 3.25% and core at 3.8%. The numbers today are at 2.6% headline inflation which is 0.65% less than expected 3 months ago. The core was 0.3% lower than expected.
This seems to mean a substantially weaker economy.
How Could People With That Much Money End Upside Down
People have not been able to adjust and re-allocate quickly.
Suppose they were doing fine with a particular sized house and maybe a second with an Airbnb. Airbnb market collapses. It is in a location where people were going into the office but are now telecommuting. It is tough to get a renter and if you do it is half the Airbnb revenue. They still have the mortgages and the loans, which there could have been problems refinancing. Maybe they had work and income instability and could not refinance. They end up with higher interest mortgages. Expenses now up $5000-10000 per month and revenue down $4000 per month.
Someone was working at Silicon Valley Bank or Credit Suisse or at Google. Lost the job. Have to get a $250k job but not a $400k job. Expenses and other things sized to old job and revenue streams. Plus 20-30% increase in all other expenses. Heat and electricity and food is up.
It takes time to downsize or to shift expenses from what is now an over-allocation on real estate. They are not yet willing to try to rent out two bedrooms of an upscale three bedroom house in the expensive coastal areas. Renting out rooms is difficult in many markets. May only cut a $10,000 per month shortfall to $7000.
Silicon Valley Bank and other banks with super sophisticated financial people were caught with ten year treasuries. The value of those instruments halved and they could not unload them as interests show from 1% to 5.5%. The chaotic markets crushed many institutions and businesses. People who not just bad at saving got swamped. It is statistically going from only 18% having problems to 45%. Those added 27% were not all immoral.
There could be older people who were fairly wealthy and they had safe bond investments. They had unexpected medical bills. They were forced to sell and their capital and monthly earnings got knee capped.
There was someone with a good retail business in San Francisco or commercial property in San Francisco. They go utterly wiped out from crime and vacancies.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.
I saw no mention of student debt. Was this intentional or do you think it has no relationship to people living paycheck to paycheck? In case you are in doubt, it is the number 1 reason for financial stress in this household.
People don’t realize yet that hey are going one step down in his economic level, although they are earning more or less the same cuantity of currency a year.
People should adapt their expenses to his real actualized incomes.
Well, I don’t even know… Perhaps you will stop buying everything on credit? No? Perhaps you should only spend money that is surplus? No. Perhaps there should be accessible and reliable elements of accumulation and a person should first spend effort and then get a nice thing, and not vice versa.
To be honest, I was stuck in the debt trap after my first wife cleaned out my savings and divorced me, leaving me with all our bills. Spent a while in denial about being poor and really needing to sell the nice place in the country we’d refinanced to pay off her credit cards when I’d married her. It’s really hard to admit that you’ve become poor because somebody else screwed you over. Finally came crashing down one day.
I accepted that I was now poor, put my life together, found a good woman to marry. We take no vacations, buy NOTHING we haven’t saved for in advance. Aside from the unavoidable mortgage at 2.5%, we do not borrow.
If that means hamburger helper most of the time, and never owning a new car again in my life? It’s still a happy life, living beneath your means. And you sleep a lot better.
You are right to focus on Real Estate and rent/mortgage costs, Brian. I moved to the Dallas/Fort Worth metroplex in the mid 80’s. Houses were very affordable. In 2006, I bought two acres of land and built a 5000-square-foot (super-insulated, low utility costs) house for $480,000. Not on the outskirts, but right in the heart of the city.
Now, I could get $1,200,000 for it, because all the people keep fleeing California, Illinois, and New York to come here for the well-paid jobs and family friendliness.
Ugly land. Hotter’n hell in the summer.
Yet people from Democrat-run states keep flocking here.
Because most people here are friendly, optimistic, freedom-loving, and family-friendly.
(Personal taxes are about the same. Although there is no personal income tax, sales taxes plus property taxes are higher than in other states. Hospitals, schools, law enforcement, and roads cost money.) Don’t move here if you have dreams of lower taxes. Property Insurance is insane. Tornadoes, hail, and unexpected freezes give insurers the yips.
If you’re making $250k/yr & living paycheck to paycheck, it’s not the economy’s fault.
I’m shy of $200K and living paycheck to paycheck because I have spoiled my family to expect annual international vacations, and to eat whatever we desire. It is a single family home and the servicing the whims of the females is about the most expensive hobby a modestly successful breadwinner can manage.
damn, I’m 40 and have never even left the contiguous US.
You need to roll back some trips, you should have loads in the bank making that kind of dough.
Sounds like you failed to establish boundaries. Oh well.
How many folks even make half that much?
People are poor because they aren’t being paid enough
Inflation is an inescapable and regressive tax on the poorest. Inflation raises the cost of all necessities and you cannot avoid buying food, shelter, clothing, fuel, etc. You cannot eat GDP numbers which are increased due to massive federal deficits that do not benefit most people.
Maybe if people stop voting for Republicans then wages can keep up with the cost of living.
But, aren’t wages dictated by a market? I could work for any nuclear firm in the country if I was willing to take a $30,000 pay cut. I always figured that my wages were rising because I was gaining experience and value while the currency was being inflated.
I remember a time when inflation was low and real wages significantly outpaced inflation.
It was called the Trump administration. Voting Democrat is for losers.
Weird how the cost of living went crazy under Democratic spending. Maybe another round of Covid stimulus or a few trillion more of the inflation reduction act will lower inflation.
Seems to indicate some sort of cultural/cognitive dysfunction if many people at most income levels are living beyond their means. Why would it be a problem with the economy per se not the culture if a lot of people choose to over spend and get in debt across the range of incomes including over $250k?
It does seem a bit strange that a significant fraction of people making a quarter of a million a year would be living so insecurely, when it’s obviously possible to live securely on a fraction of that, if you simply accept a lesser standard of living. I mean, I can see it in some markets, like Manhattan, where a quarter million a year is chump change, but it can’t be THAT large a fraction of such people living in outlier high cost of living areas, can it?
I’d guess it’s due to people having formed expectations as to their standard of living before the cost of living started skyrocketing a few years ago, and their adjustments are seriously lagging, maybe out of a mistaken impression that they’re just going through a momentary tight spot, and things will shortly get better. They don’t want to accept that, despite the nominal numbers, they actually have become significantly poorer than they were just a few years earlier, and should anticipate becoming still poorer in coming years.
What’s going on here, of course, is that the cost of government has taken a big leap, leaving less left over for the private sector. And government is now imposing ever mounting burdens on everybody in terms of regulation.
At the lower end of the economic spectrum, of course, you’d have to expect that importing 3 million new illegal immigrants a year would hurt the wages of low skilled laborers.
I think it’s going to take a while before people generally understand that this isn’t spontaneous, it’s being done to them, and deliberately. And things will get ugly when they do realize it.
Then the challenge will be that the government and what is rapidly becoming state run media will be desperately spinning things in an effort to misdirect their wrath.
People have not been able to adjust and re-allocate. Suppose they were doing fine with a particular sized house and maybe a second with an Airbnb.
Airbnb market collapses. They are in a location where people are telecommuting, tough to get a renter. They still have the mortgages and the loans. Maybe they had work and income instability and could not refinance. Ended up with higher interest mortgages. Expenses now up $5000-10000 per month and revenue down $4000 per month.
Someone was working at Silicon Valley Bank or Credit Suisse or at Google. Lost the job. Have to get a $250k job but not a $400k job. Expenses and other things sized to old job and revenue streams. Plus 20-30% increase in all other expenses. Heat and electricity and food is up.
It takes time to downsize or to shift expenses from what is now an over-allocation on real estate. They are not yet willing to try to rent out two bedrooms of an upscale three bedroom house in the expensive coastal areas. Renting out rooms is difficult in many markets. May only cut a $10,000 per month shortfall to $7000.