Americans gripped by intense financial stress

As we close out the first five months of 2024, there is a glimmer of hope on the horizon. Americans’ financial stress levels have shown a slight but significant improvement, easing from a recent high of 67.5 recorded in 2023 to an average of 64.4 in the RealClearMarkets/TIPP Financial Stress Index. This is a positive change, considering that the average for 2023 was 67.5 and the highest recorded level was 68.4 in 2008. The chart below illustrates the average stress index for each year.

However, the severity of the situation remains acute. Of the 35 demographic categories we track, 14 (40%) still experience elevated stress, 10% higher than their historical average. Further, all 35 groups are in the “stress zone”, a clear indication that financial stress is not a localized problem, but a widespread issue affecting all 35 groups, highlighting the urgency of the situation.

of RCM/ADVICE The financial stress index is a separate metric of financial stress. In December 2007, we started using it to track financial stress in the country. The index accurately reflects Americans’ financial concerns about paying bills and surviving. Consumer spending drives two-thirds of the economy. When people are stressed, they are reluctant to spend money.

There is another aspect. Financial stress isn’t just a number on a spreadsheet. It can lead to serious health problems such as insomnia, weight gain (or loss), depression, anxiety, relationship difficulties, social withdrawal and physical ailments such as headaches, gastrointestinal problems, diabetes, high blood pressure and heart disease.

We calculated the stress index from the answers to the questions: Thinking about your personal finances, compared to the last three months, do you feel more stressed these days, less stressed these days, or do you feel the same level of stress?

The index ranges from 0 to 100; the higher the number, the more stress. A reading of 50.0 is the neutral point.

On a positive note, the May reading of the RealClearMarkets/TIPP Financial Stress Index is 66.1, below the three-month moving average of 66.7, reflecting positive momentum. Persistent hyperinflation, layoffs, and job insecurity exacerbate financial stress.

The chart below shows that financial stress affects all Americans, regardless of party affiliation. Republicans (69.0) have the highest stress levels, while Democrats’ stress level is only 6.3 points lower (62.7). Independents’ stress level is between Democrats and Republicans at 66.9, 0.8 points higher than the overall 66.1.

From Numbers

The table below shows historical index averages, May readings and differences between demographic groups. All 35 demographic groups show stress, with readings above the neutral level of 50.0. Of the 35 demographic categories, 14 (40%) experience stress, 10% higher than their historical average.

Here are the ten demographic groups with the highest levels of stress based on a five-month average in 2024. Conservatives, Republicans and households under $30,000 are the most stressed, followed by white women.

The chart below shows the ten demographic groups with the least stress based on the average for the first five months of 2024. The groups experiencing the least stress are men, households with incomes of $75,000 or more, individuals with a college degree or higher, moderates, households in the $50K-$75K income bracket, those in the 65+ age bracket, Democrats, blacks, investors, and liberals.

Cause of stress

Most Americans are stressed because their wages have not kept pace with rising prices. According to Moody’s, the typical American household now requires $1,069 more each month (equivalent to $12,828 annually) compared to three years ago.

Under President Biden, real wages have decreased by 2.6%. According to government data, average hourly earnings for all employees fell 2.6% to $11.09 in April 2024 from $11.39 in January 2021 when Biden took office. Nominal wages represent the amount of money you earn without taking into account changes in the cost of living. On the other side, real wages consider inflation and measure the purchasing power of wages.

In the latest TIPP survey completed in early May, only 18% of Americans say their incomes have kept pace with inflation.

Financial difficulties hit low-income families the hardest

In the current economy, Americans struggle to make ends meet. The chart below depicts their struggles. It shows that more families in the lowest income group are struggling than families with higher incomes. For example, 69% of households with incomes under $30K are worried about paying their utility bills compared to 60% for $30K-50K, 53% for $50K-75K and 41% for $75K.

Different strategies to manage higher food costs

Americans are struggling to adjust to higher food costs. The chart below reveals some shocking statistics.

• 31% eat less
• 23% are skipping meals
• 21% go to food banks to fill up on groceries
• 19% have applied for federal or state aid

Biden’s handling of the economy

In the latest TIPP poll taken in early May, a majority of Americans (51%) give Biden a failing grade (D or F) regarding his handling of the economy. Only 27% give it an A or B.

Among Democrats, half (52%) give him favorable grades, 19% believe he deserves failing grades, and another 25% rate his performance as average (C).

By contrast, Republicans are far more critical, with 81% expressing dissatisfaction with Biden’s handling of the economy.

Additionally, independents also express their disappointment, with 57% giving a failing grade, 18% giving good grades, and 21% rating Biden’s performance as average.

Current record stress levels are a consequence of Bidenomics. Recent GDP and manufacturing data reflect that the economy is likely to slow. Combined with unrelenting inflation fueled by Biden’s wasteful spending, inflation is likely to continue for the foreseeable future. Americans should prepare for a long period of stagflation. We don’t like to be the bearers of bad news. However, we would prefer not to handle the situation or find scapegoats.

If you’re interested in what President Biden’s economic adviser has to say, watch this video.

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