Overall financial well-being has decreased in the last year, despite a robust labor market, according to the report.
06/06/2023 2:25 P.M.
3 minute read
A new report released last month from the Federal Reserve Board provides an inside look at the financial lives of U.S. adults and their families.
The report, Economic Well-Being of U.S. Households in 2022, found that rising prices have had a negative impact on the majority of households, and overall financial well-being has decreased since last year, despite the fact that employees have continued to benefit from a robust labor market.
The report draws from the board’s 10th annual Survey of Household Economics and Decisionmaking (SHED), which was conducted in October 2022. The report includes survey results from more than 11,000 adult respondents, and discusses findings related to financial well-being, income, expenses, employment, banking and credit, housing, retirement and investments, and higher education and student loans.
Here are some key findings from the report:
- “In the fourth quarter of 2022, 73% of adults reported either doing okay or living comfortably financially, down 5 percentage points from the previous year and among the lowest levels observed since 2016.
- Consistent with these changes in overall financial well-being, fewer adults reported having money left over after paying their expenses.
- Fifty-four percent of adults said that their budgets had been affected ‘a lot’ by price increases.
- Parents living with children under age 18, Black adults, Hispanic adults, and those with a disability were more likely to say that their budgets had been affected ‘a lot’ by higher prices.
- Fifty-one percent of adults reported that they reduced their savings in response to higher prices.
- The share of adults who reported that they would cover a $400 emergency expense using cash or its equivalent was 63%. This was down 5 percentage points from a high in 2021.
- Thirteen percent of adults said they would be unable to pay the expense by any method, which was slightly higher than in the last survey.
- Indicators of workers’ opportunities for new positions and pay increases strengthened relative to 2021. The share who received a raise, asked for a raise, or voluntarily left a job increased over the prior year, while the share who lost a job decreased. For example, 33% of adults said they received a raise or promotion in the prior year, up 3 percentage points from 2021.”
“The SHED results provide helpful insights into the economic well-being of Americans,” said Federal Reserve Board Governor Michelle W. Bowman. “It is important that we continue to refine our understanding of the economic challenges facing U.S. households.”
The report also includes information on how consumers changed their financial habits in reaction to price increases such as using less of a product or ceasing to use it altogether, transferring to a less-expensive product, or delaying a significant purchase were all strategies suggested.
Find the report, fact sheet, downloadable data, data visualizations, and a video summarizing the survey’s findings here.
ACA’s Take
The accounts receivable management (ARM) industry is instrumental in keeping America’s credit-based economy functioning with access to credit at the lowest possible cost.
Research such as this from Federal Reserve Banks, academics and regulators reflects the industry’s integral role in maintaining a healthy economy and is helpful in ACA’s advocacy efforts to show that overly restrictive regulations on the collection process have led to a decrease in available credit for consumers.
After analyzing the restrictiveness of various state level debt collection regulations, the Federal Reserve Bank of New York found that limiting debt collection practices leads to a decline in access to credit and weakens key indicators of financial health. The greatest impact of these restrictions is on borrowers with lower credit scores.
The Federal Reserve Board’s economic well-being report is also helpful in ACA’s advocacy efforts to demonstrate how proposed regulations and laws on wage garnishment impact consumers’ overall access to credit based on where they live, their credit score and other demographics.
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