Alarming Inflation Trend: 75% of Middle-Class Behind on Cost of Living Income — Even More Fear Imminent Recession

Frustrated couple checking bills at home using laptop.
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Four-decade high inflation, combined with soaring interest rates and fears of a recession, are pushing Americans to take drastic measures such as delaying retirement or postponing big purchases. Against this backdrop, a new survey found that 75% of middle-income household earnings are falling behind the cost of living, while 77% of those surveyed believe the country will fall into a recession by the end of the year.

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The Primerica Middle-Income Financial Security Monitor for the second quarter of 2022 — which monitors the financial health of those with annual household incomes of $30,000-$100,000 — found that 61% believe the American economy will be worse off over the next year than it is now, with just 14% thinking it will improve.

With inflation being the top concern for 41% of Americans, additional worries include paying for food and groceries, at 26% — up four percentage points since March — as well as being concerned about their current financial situation, at 25%, which is up eight percentage points since March, according to the survey.

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“Middle-income families are taking a hard look at their finances right now. Rising costs continue to eat into their bottom line amid fresh concerns of a recession,” Glenn J. Williams, CEO of Primerica, said in a press release. “For 45 years, we’ve helped working families prepare to weather these types of situations. We’ve reassured them that professional financial guidance is not only for the affluent. It is critical to their long-term planning and can support their efforts to endure a potential economic downturn.”

To cope with inflation, Americans are taking several steps, including cutting back on spending, with 71% cutting back on restaurants and takeout meals, up from 57% in March. In addition, 49% plan to cut back on groceries, also a big increase from 37% in March.

Americans are also re-assessing major purchases, with 38% having already delayed one due to rising interest rates.

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Meanwhile, the survey found that while families said they want to spend less, they are actually spending more –36% reported having spent more money in the past year, up six percentage points since March and 10 since December. This is not surprising with inflation at 9.1%, according to the latest Consumer Price Index (CPI) data released July 13.

Jeanniey Walden, Chief Innovation Officer at DailyPay, told GOBankingRates that across the entire labor market, real earnings declined at a staggering annualized rate of 12% in June. “Coupled with that, June’s 9.1% CPI surge indicates how bad things are getting for working families,” she said. “Compounding this are the negative effects of inflation, which disproportionately impact hourly workers who spend the largest percentage of their income on everyday staples like food and gas, which have experienced some of the highest price increases.”

Walden noted, however, that there is some good news.

“We are seeing a growing trend of employers stepping up to support their employees and their families during these uncertain times with innovative solutions. Automated instant bonuses, and real-time earnings alerts and access to earned pay help lessen the impact for working families, and help decrease stress and increase morale at work,” she added.

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These uncertain times are leading to anxiety, which continues to be one of the biggest challenges people face when it comes to tracking their financial information, the survey noted. Another point of concern is that 42% of the respondents said they plan to work longer before retirement, while 75% don’t think they have enough saved to retire comfortably, which is up 10 percentage points since March.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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