Paycheck to Paycheck: The American Nightmare

50% of Americans say they are broke, according to a recent survey. There is an old saw that states, "Facts are stubborn." When it comes to working folks' paychecks, savings, and plans for the future, the effects of inflation have been menacing.

It all begins at home. Housing prices have soared, and the cost of buying a home has increased by 50% in just five years. The United States was founded in 1776, so what took 243 years for home prices to reach has increased by 53% in just five years; the magnitude is enormous. For existing property owners, it has been a windfall, but for the many trying to purchase for the first time or upgrade because their family has grown, it’s a lose-lose situation.

The rate of inflation growth appears to be plateauing, yet the basket of all items tracked by the Consumer Price Index has risen by 23% since July 2019. The cost of buying a new car is becoming an anvil around the buyer's neck; automobile insurance costs have also increased by 50%.

Services are driving the economy, and their costs exceed the general rate of inflation. Energy expenses have diminished somewhat but remain above the overall rate.

Herein lies an intractable dilemma. Hourly earnings have risen from $28.02 to $35.07 during this timespan, a 25% increase. But the good news is somewhat misleading because, after adjusting for price pressures, the "real" hourly earnings rate is up only two percent.

Real wages have barely outpaced overall inflation but have severely lagged behind the rising costs of Americans' largest expenditure: housing. The cost of housing, adjusted to the 2019 level, is 25% higher than the real average hourly earnings of all employees.

Have a wonderful weekend!