America’s Middle Class Is Feeling the Pain of This Economy

Stubborn Squeeze

America’s economy has defied expectations: The job market continues to be strong, and GDP is growing, in large part thanks to seemingly unwavering consumer spending even in the face of high inflation. But as so often, it’s not quite that simple.

The economic environment is particularly weighing on middle-class Americans: A growing percentage — 44% — of middle-income families feel stressed about the current economy, according to a Harris Poll. That’s up from 40% a year earlier when the inflation rate still hovered around 8%.

High Cost Living

Life has become more expensive, and people are feeling it.

On the one end, inflation jumped as the economy emerged from the depth of the pandemic, and prices rose on everything from eggs to cars. In response, and to get inflation under control, the Federal Reserve hiked interest rates to a multi-decade high. To its credit, the pace of inflation has come down, but that doesn’t mean that anything has gotten cheaper. Case in point, the cost of food is up almost 25% since pre-pandemic times. Meanwhile, the rising rates are weighing on household budgets, as the cost of debt has increased. This is dampening optimism, despite ongoing economic growth.

Higher borrowing costs have hit middle-class consumers especially hard. More than 60% say their financial circumstances are unchanged or worse today versus last year.

Spending Through the Generations

It’s not just socioeconomic groups feeling the economic shifts. Baby Boomers are significantly outspending Millennials.

Older Americans are, in many cases, more insulated from borrowing costs, for example because they have already paid off real estate purchases, or at least locked in lower rates. Stock market gains during the pandemic further bolstered the net worth of that demographic group.

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