Middle-Class Americans Feel Financially Unwell

Falling Behind

The U.S. economy has held up surprisingly well in the face of persistent inflation, if you ask economists. But for many middle-class Americans, it doesn’t feel like it.

It’s the concept of bifurcation, which describes two different, perhaps opposing, dynamics playing out at the same time.

Economic Divide

About 2 in 3 American middle class consumers (65%) say they are struggling financially, and find it difficult to save for the future or pay down debt, according to a survey from the National True Cost of Living Coalition. (This survey defined the middle class as those earning 200% more than the poverty level, or at least $60,000 per year for a family of four.)

But by many metrics, the American economy is still doing well. The unemployment rate remains below 4% in April, the nation’s GDP continued to grow in the first quarter of 2024 (albeit less than initially expected), and the stock market continues to hit new record highs.

However, a strong economy doesn’t mean all Americans are thriving. In fact, the disconnect between positive data and the financial realities on the ground might help explain why consumer sentiment is so overwhelmingly bleak. Indicators and headlines tell an optimistic story, but meanwhile, 40% of middle-class households feel unable to break the paycheck-to-paycheck cycle, per the survey. It reminds us that the pandemic recovery was patchy, and that even in a very tight labor market, continuously rising prices eventually weigh on household budgets. Sure, the pace of inflation has slowed from its highs, but that doesn’t mean anything got cheaper.

Looking Ahead

There are federal programs and economic safety nets in place to help low-income Americans. But the middle class often earns too much to qualify, while also not being able to save enough for the future.

For economists and institutions like the Federal Reserve, these are important factors to consider when they measure how Americans are feeling, how they’re spending, and how that will affect the path of the U.S. economy.

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