The Haves and Have-Nots at the Center of America’s Inflation Fight

There’s a growing gap between Americans who are battered by high inflation and interest rates and those who are actually benefiting

I have done several posts on how people have been dealing with inflation. But it might have been creating winners and losers. Links to those posts are below.

By David Uberti of The WSJ. Excerpts:

"The third year of America’s inflation fight is widening a split at the heart of the economy.

The stock market is soaring, household wealth is at record levels and investment income has never been greater. At the same time, some families’ pandemic-era savings are running dry, and delinquencies on credit card and auto-loan payments have jumped.

Warning signals are flashing for more low- and middle-income Americans, exposing a division between people whose gains are being whittled down by elevated inflation and borrowing costs and those who are benefiting from high asset prices and bond returns."

"Wage gains have kept full-time workers’ weekly median earnings roughly steady since early 2020, when taking price hikes into account"

"Middle- and lower-income Americans generally faced faster inflation than the affluent from 2006 to 2023 . . . thanks in large part to housing and insurance prices. New York Fed researchers say aggressive moves to fight inflation also disproportionately hurt the poor through higher borrowing costs and a weaker labor market."

"excess savings accumulated during the pandemic have been fully depleted for the bottom 40% of earners. Now, delinquency rates for credit cards are higher than at any point since the aftermath of the Great Recession in 2010"

"In addition to paper gains from stocks and home values, Americans are pocketing more cash than ever from dividends and interest, helping many wealthy people keep pace with inflation, if not outrun it."

"On top of stocks’ artificial intelligence bonanza, Americans are earning investment income at a seasonally adjusted rate of about $3.7 trillion annually"

"That is $770 billion more than January 2020"

"Some analysts and banks say that household finances are largely holding up as the U.S. economy returns to prepandemic norms. Overall debt is still low by historical standards, while some credit-card companies have reported that an uptick in delinquencies stems from tighter lending standards rather than consumer weakness. 

David Tinsley, senior economist at the Bank of America Institute, said low-income customers’ spending remains robust as wage gains continue outpacing inflation. Still, there are soft pockets among Gen Z and Millennials who can’t fall back on savings or assets."

"At an annual rate accounting for seasonal swings, Americans in June were on pace for $531 billion in personal interest expenses in 2024, according to the St. Louis Fed. That’s up 77% from two years earlier."

Related posts:

An Increase in Uninsured Drivers Is Pushing Up Costs for Everyone Else (2024) 

Inflation has caused consumers to choose what they need to cut back on (insurance)

Costco and Sam’s Club Aisles Are Full of Gen Z Shoppers (2024)

Consumers are buying in bulk to save money by getting a lower per unit price

Inflation is mentally taxing (2024)

Inflation is mentally taxing. Dealing with a straitened budget exacts a psychological toll as well as a financial one

Store Brands Are Filling Up More of Your Shopping Cart (2024) 

People are on the look out for cheaper alternatives due to inflation

Consumers Fed Up With Food Costs Are Ditching Big Brands (2024) 

One thing that I always talked about with inflation was that one of its costs was all the things we had to do to avoid it. Consumers are making 8% more trips to different retailers as inflation continues to upend household budgets. They are going to more stores to find lower prices. But it costs time to do that and probably more money on gas.

Are Americans Worrying Too Much About Inflation? Two opposing views (2024)

The Era of One-Stop Grocery Shopping Is Over (2024)

When workers were paid twice a day and given half-hour shopping breaks (Germany, 1923) 

By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. The requirements to calculate and recalculate commercial transactions in the billions and trillions made it practically impossible to do business in paper Marks.