Americans' overall income has accelerated since the pandemic, but so has inflation – and a new poll finds that far more people are noticing the higher prices than the pay gains.
Two-thirds say their household costs have risen since the pandemic, compared with only about a quarter who say their incomes have increased, according to a poll by The Associated Press-NORC Center for Public Affairs Research. Half say their incomes have stayed the same. Roughly a quarter report that their incomes have dropped.
The fast-rising prices that have been surging through the economy have forced many Americans to change their spending habits. About one-third say, for example, that they're driving less often, and roughly 3 in 10 Americans say they're buying less meat than they usually do. In the past year, gas prices have jumped nearly 50%, and the cost of meat is up 15%.
Most people say the sharply higher prices for goods and services in recent months have had at least a minor effect on their financial lives, including about 4 in 10 who say the hit has been substantial. The poll confirms that the burden has been especially hard on low-income households.
On Friday, when the government will issue its latest reading on consumer prices, it’s expected to report that inflation soared 6.7% in November compared with a year earlier, according to economists surveyed by data provider FactSet. That would top October’s 6.2% year-over-year increase and would mark the highest consumer inflation rate in nearly four decades.
The findings in the AP-NORC poll underscore the financial pressures that this year's spike in inflation has imposed on many Americans' finances. Still, as they have since before the pandemic struck in March 2020, a majority say their own finances remain good.
Yet many Americans have soured on the economy in the past year, even though most economic indicators point to a still-steady recovery, with near-record job openings, solid retail spending and a rebound in manufacturing. Only about one-third say the economy is "good," down from about half who said so in March. That may illustrate why President Joe Biden hasn’t benefited politically from positive readings on the economy.
The poll, though, finds a sharp partisan split: Only about 1 in 10 Republicans describe the economy as "good"; more than half of Democrats say so. Yet when asked about their own financial situations, people are more positive and less divided along party lines. About two-thirds of Americans say their personal finances are in good shape. Roughly 7 in 10 Democrats and about 6 in 10 Republicans say so.
Analysts generally expect the economy to grow at a brisk 7% annual rate in the final three months of this year, boosting growth for all of 2021 to its fastest calendar-year pace since 1984. The unemployment rate has dwindled to 4.2%, from 6.7% a year ago. And with many employers struggling to hire, the economy still has nearly 4 million fewer jobs than it did before the pandemic.
U.S. households, on average, are earning higher incomes than they did before the pandemic. Wages and salaries grew 4.2% in September compared with a year earlier, the largest annual increase in two decades of records. And the government provided a $1,400 stimulus check to all households in March as well as a $300-a-week unemployment aid supplement from March to September. Most households with children began receiving the $300 monthly child tax credit in July.
Those government measures, combined with higher paychecks, lifted Americans' overall household incomes by 5.9% in October compared with a year earlier. Yet inflation jumped to 6.2% that month, the highest reading in three decades, negating the income gain.
Jason Furman, President Barack Obama's former top economic adviser, suggested that many people don't think about government payments, such as stimulus checks, when considering their own incomes because those payments are generally one-time windfalls.
A likely factor in Americans' worries about inflation is that rising prices have been concentrated in highly visible categories: The poll finds that 85% say they paid higher-than-usual prices for food and gas in recent months. Nearly 6 in 10 say the same about electricity. About 4 in 10 say they bought appliances recently and that the prices were higher than normal.
The effect is even more pronounced among middle- and lower-income Americans: Half of people in households earning less than $50,000 a year say the price increases have had a major impact on their finances. Only a third of those in households earning more than $50,000 say the same.