Let’s check out some charts from the latest fed survey on how well people are doing financially. This data and a new chart by me tie everything I have said about the rent and the election together.
Economic Well-Being
Please consider the Federal Reserve Board Economic Well-Being of U.S. Households in 2023 Report.
During 2023, 72 percent of adults reported either doing okay or living comfortably financially, similar to the 73 percent seen in 2022 but down 6 percentage points from the recent high of 78 percent in 2021. Despite the moderating pace of inflation, higher prices continued to be a top financial concern. Sixty-five percent of adults said that changes in the prices they paid compared with the prior year had made their financial situation worse, including 19 percent who said price changes made their financial situation much worse.
Some groups continued to experience financial stress at higher rates than others. In particular, low-income adults were more likely to face material hardships, including not paying all bills in full, sometimes or often not having enough to eat, and skipping medical care because of cost. Seventeen percent of adults said they did not pay all their bills in full in the month prior to the survey.
As in the prior year, 63 percent of adults said they would cover a $400 emergency expense using cash or its equivalent and 13 percent would be unable to pay the expense by any means. Forty-eight percent of adults said that they had money left over after paying their expenses in the month prior to the survey, similar to 2022 but below 2021 and pre-pandemic levels.
Are You Worse Off Financially Than a Year Ago?
Between 2022 and 2023 the numbers improved (lead chart). However, the numbers are a disaster compared to the peak in 2019.
- Over 60: In 2019, 11 percent said they were financially worse off. In 2023, 29 percent said they were financially worse off. That’s a rise of 18 percentage points.
- Over 45-59: In 2019, 15 percent said they were financially worse off. In 2023, 35 percent said they were financially worse off. That’s a rise of 20 percentage points.
- Over 30-44: In 2019, 15 percent said they were financially worse off. In 2023, 32 percent said they were financially worse off. That’s a rise of 17 percentage points.
- Over 18-29: In 2019, 15 percent said they were financially worse off. In 2023, 29 percent said they were financially worse off. That’s a rise of 14 percentage points.
Are You Doing OK Financially?
Doing OK Financially 2021 vs 2023 Details
- Over 60: In 2021, 84 percent said they were financially OK. In 2023, 82 percent said they were financially OK. That’s a drop of 2 percentage points.
- 45-59: In 2021, 77 percent said they were financially OK. In 2023, 72 percent said they were financially OK. That’s a drop of 5 percentage points.
- 30-44: In 2021, 75 percent said they were financially OK. In 2023, 66 percent said they were financially OK. That’s a drop of 9 percentage points.
- 18-29: In 2021, 74 percent said they were financially OK. In 2023, 66 percent said they were financially OK. That’s a drop of 8 percentage points.
Millennials and Zoomers are doing much worse than Gen X and Boomers.
Can You Handle a $400 Emergency?
Handle a $400 Emergency 2021 vs 2023 Details
- Over 60: In 2021, 79 percent said they could handle a $400 expense with cash. In 2023, 77 percent said the same thing. That’s a drop of 2 percentage points.
- 45-59: In 2021, 67 percent said they could handle a $400 expense with cash. In 2023, 64 percent said the same thing. That’s a drop of 3 percentage points.
- 30-44: In 2021, 63 percent said they could handle a $400 expense with cash. In 2023, 55 percent said said the same thing. That’s a drop of 8 percentage points.
- 18-29: In 2021, 58 percent said they could handle a $400 expense with cash. In 2023, 52 percent said the same thing. That’s a drop of 6percentage points.
77 percent of age group 60+ can handle an emergency $400 expense with cash. Only 52 percent of those age 18 to 29 can.
Do You Have 3 Months Emergency Savings?
Emergency Savings 2021 vs 2023 Details
- Over 60: In 2021, 73 percent said they had 3 months of emergency savings. In 2023, 69 percent said the same thing. That’s a drop of 4 percentage points.
- 45-59: In 2021, 58 percent said they had 3 months of emergency savings. In 2023, 54 percent said the same thing. That’s a drop of 4 percentage points.
- 30-44: In 2021, 54 percent said they had 3 months of emergency savings. In 2023, 47 percent said said the same thing. That’s a drop of 7 percentage points.
- 18-29: In 2021, 46 percent said they had 3 months of emergency savings. In 2023, 39 percent said the same thing. That’s a drop of 7 percentage points.
73 percent of age group 60+ have 3 months of emergency savings. Only 39 percent of those age 18 to 29 do.
Pandemic Savings Wiped Out
The last three chars say the same thing, very loudly: All of the savings from three rounds of pandemic stimulus, rent abatements, and student debt cancellations have been wiped out by rising inflation.
Biden keeps telling people they are better of. Some are but over 30 percent of respondents say they are worse off.
Economists and Biden still don’t get what’s happening. That’s because Biden does not believe the obvious and none of these surveys ask the right questions.
Two Key Questions Not Asked
- Do you own a house or do you rent?
- If you own a house, did you refinance at a lower rate?
People who own their own home and were able to significantly lower their mortgage rate are generally better off.
Those who rent and want to but have watched rent and home prices soar out of sight.
Home Prices Hit New Record High
The Case-Shiller national home price index hit a new high in February. That’s the latest data. Economists don’t count this as inflation.
On May 2, I commented Home Prices Hit New Record High, Don’t Worry, It’s Not Inflation
Not Inflation?!
Economists, including the Fed, consider homes a capital expense, not a consumer expense.
As a result, they all ignore economic bubbles and blatantly obvious inflation on grounds it’s not consumer inflation. This has gotten the Fed into trouble at least three times. The first was the dot-com bubble, then the Great Recession housing bubble and now.
It’s really pathetic when you make the same major mistake over and over and over. It’s a result of groupthink.
They all believe in the same silly models based on disproved theories including inflation expectations and the Phillips curve. You do not get in the good ole boys Fed club unless you think like a good ole boy.
CPI Up 0.3 Percent With Rent Still Rising Steeply
Rent rose another 0.4 percent in April. Food and beverages were flat with food at home declining but food away from home rising.
On May 15, I noted CPI Up 0.3 Percent With Rent Still Rising Steeply, Food a Bright Spot
Yet Another Groundhog Day for Rent
Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.4 percent in March. Rent of primary residence has gone up at least 0.4 percent for 32 consecutive months!
Rent vs Wages
I created a new chart today to see if it could explain why “You Doing OK Financially” peaked at the end of 2021.
From 2018 until 2022 the gap between rent and wages tightened. Starting January 2022 rent rose more than wages.
Meanwhile, cost of a mortgage rose from about 3 percent to over 7 percent in the same timeframe while the cost of a home increased too.
People Who Rent Will Decide the 2024 Presidential Election
I have been discussing rent and the election since January, and put all the pieces together in my April 20 post: People Who Rent Will Decide the 2024 Presidential Election
Q: What is it that young voters really have on their minds?
A: RentWho Are the Renters?
The answer is younger voters and blacks.
The Apartment List 2023 Millennial Homeownership Report shows Millennial homeownership seriously lags other generations.
Generation Z homeownership is dramatically lower still.
And according to the National Association of Realtors, the homeownership rate among Black Americans is 44 percent whereas for White Americans it’s 72.7 percent.
That’s the largest Black-White homeownership rate gap in a decade.
The pollsters are not asking the right questions.
Roughly 36 percent of households rent. 31 percent say they are worse off financially. These two idea are related. The chart of rent vs hourly wages ties things together nicely.
But hey, Biden tells everyone they are doing better and mainstream media laps it up.
They are fixing it. Hot potato handoff?
Looking around i’d have to say inflation is a national security issue.
funny thing is happening
I’m now getting access to ‘good’ workers looking for 2nd job/extra income
yesterday I may have found a ‘cleaner’ for our units
she recently ‘took’ another job only to find out(in week) that new company was rotten to core so she went back to her old employer
her supervisory position was gone and she now gets a lot fewer hours
$500 month+ less
Where I live, I have heard similar things from people I know who run small businesses. They are seeing more unsolicited job applications this year.
I think you’re right Mish. It’s scary how many people can’t afford a surprise $400 expense.
Don’t extrapolate CS or MickeyD. What’s good about MCD : they employ 14Y kids
on Sat & Sun. Their price slowdown overweight and obese people from buying junk food.
The spread between CS top 10 and national was the widest in 2006. In real terms
home prices were the cheapest in 1995. It took a decade to reach the peak. Between
2006 and 2018 the national moved faster. In 2018 the flyover reached a new all time high. The top 10 didn’t. Since 2020 both are rising vertically up. Rent, CS, OER and the CPI were glued together until 2000. If in the next decade both will be in a trading range, or in a low slog up, in real terms home prices will fall. The pain is maxed under Biden. Rent in the flyover areas is rising faster than in the top 10 cities and wages. U need two to pay rent or to buy a house. It makes sense to get married.
Homeowners pay plumber, carpenter and electrician in retail prices. Landlords pay wholesale. They can shift the cost of electricity, water, cable,,,to tenants. They fine tenants like a bank. The waiting list for a vacant apt is still long, but turnover is rising faster. We don’t know why.
Polygamy would do wonders for home affordability.
Good news for Biden. 54% of people doing better than 2 years ago….69% of elderly doing better than 2 years ago. Trump is dead in the water.
“Can You Handle a $400 Emergency?”
What does $400 buy anymore? I’d say the question should at least double that amount to reflect the real cost of things.
My dentist charged me $422 yesterday. Food cost me less than $400/m : quinoa, buckwheat, beans, nuts, potatoes, plenty of veggies & fruits… No meat, chicken or fish. Rarely a good steak in a restaurant. Alcohol way down.
McDonalds $5 meal is now up to $17.69 (higher in NYC)
Mish keeps claiming “the dollar is up”, citing the antiquated “dollar index” which is now merely an inverse Euro index. Europe is in an emergency panic forced de-industrialization, which tells us nothing about the USDollar.
The USdollar doesn’t go anywhere near as far as it did only a few years ago, and uncontrolled fiscal spending is the reason why. Note the Fed tightened, it wasn’t the Fed’s fault — it was Congress and the senile man.
When Joe Biden was a boy, driving an 18 wheeler around law school while singing in an all black choir, apparently $400 was a months wages? Not sure if that was ever true, it is the mumblings of a senile man who took bribes his whole life.
The US government has a very serious credibility problem, and having octogenarians ramble on about walking to school uphill both ways is no longer funny
He also walked through snow.
Both ways.
Barefoot.
any kind of emergency I ever had was usually around $500 and that was 20 years. A $400 emergency nowadays is a bad example. I don’t know why they still use that number.
I don’t have a link, but a poll I saw recently put the figure of “worse off” at 40%, which is greater than the percent who said so in 1980 when Ronald Reagan asked the same question and won the election largely because of that.
I predict Trump will be acquitted next week and then it’s a question of “what they’ll do next” to try to keep him from being president. If the election were held today, he’d win easily.
Maybe they will past Trump to bigger and worse things.
Mish wrote: “People who own their own home and were able to significantly lower their mortgage rate are generally better off. Those who rent and want to but have watched rent and home prices soar out of sight.”
This ignores property taxes and homeowners insurance (which is required by most if not all mortgage lenders). In many cases, the benefit (if any) of refinancing (at lower rates a few years ago) has been more than offset by increased annual costs – especially property taxes and maintenance (insurance) costs.
Landlords have upped rents to cover rising costs – like property taxes and insurance. It is generally not an increase in profits. REITs (which increasingly own appartment complexes) often borrow money at short term rates, which have obviously gone up to cover inflation caused by fiscal irresponsibility.
Most of these items apply to homeowners as well. Saying my home’s alleged market value went up to compensate is nonsense – it went up due to inflation, not value appreciation. And the price increase is only available when I sell or maybe if I refinance (at a higher interest rate) – until then I am taxed (property taxes) on an imaginary price increase.
Property taxes in many parts of the country have skyrocketed to cover extremely generous pension scams for public unions. Most people in the private sector get 401(k)s or IRAs or no retirement plan at all — defined benefit pensions are extremely rare outside of public employees. Property taxes are assessed against the inflation driven home price increases.
Mish talked about sky rocketing homeowners insurance costs a few weeks ago. A lot of expensive properties are being built right at the high tide water line (hurricane magnets). But even in land locked states, the cost of hiring a competent plumber, electrician, painter, handyman of whatever sort has skyrocketed. The cost of maintenance for home owners has skyrocketed — doesn’t matter if you pay via higher insurance premiums or pay via higher out of pocket costs.
If renters were being gouged, a large number of them would just buy a house. They can’t do that because the home ownership costs also skyrocketed.
Out of control fiscal spending is causing inflation. That is the problem, and it impacts both renters and home owners in similar but slightly different ways
You get an upvote for your insightful comment. It’s about to get a whole lot worse too.
https://www.thomasnet.com/insights/sourcing-for-hydraulic-equipment-up-314-yoy-amid-ongoing-skilled-labor-shortages/
those systems arent built to combat skilled labor shortages. They’re built to replace labor. Only thing shortages have done is speed them up.
My property tax is up 45% this year. Homeowners doubled and im under constant threat of cancellation and have switched policies 3x in the past 5 years and now im being threatened to be dropped again over mold on my roof that I can’t even find. Other than green shingles.
Personally, I’m way better off financially, though I’ve had to spend way more than normal. My income has just gone up so much more than the higher spending.
However, I can see past anecdotal personal stuff and not assume that is true for everyone. Most people I know are hurting worse than normal financially and I have to avoid talking about how good things are for me because it would be insensitive.
The crowd Barry Ritholtz runs with is doing great.
“I went to a local BBQ/Car Show this weekend, and I got dragged into a conversation about “how lousy the economy is.”
Rather than inundating people with data (see below), I asked some questions: Where did you guys go on your last vacation? (It ranged from Disney to the Greek islands to Bali) How is your business? (uniformly Booming). How many people have you hired since the pandemic ended? (5-50). What car did you drive here? (Porsche, Ferrari, Vette, vintage 1950s, Viper, not a junker in the crowd). What is your Daily Driver? (Benz, Lexus, BMW, Range Rover). How much more is primary residence worth today than a decade ago? (anywhere from +$1m to + $5m) How many homes do you own? (between 1 and 5). How many cars do you own? (2 to 400) Tell me about your boat (28-foot sailboat local to a 75-footer in Palm Beach).”
https://ritholtz.com/2024/05/actions-not-words/
Therefore everything is great and the Fed needs to cut interest rates ASAP.
But no one is thinking about the renters which is why we need a whole new paradigm this election cycle.
Once Trump gets in there, everything will be manically better because Trump is gonna eliminate birth control and usher in the unified Reich. /s
https://www.nbcnews.com/politics/2024-election/trump-shares-video-unified-reich-social-media-rcna153214
Whoa… I did nazi that coming!
Overheard my butler telling the cook to do fillets and lobster for the staff’s stay-at-home Memorial Day. Good show.
Thanks for the data. Dovetails with my informal, anecdotal surveys in my area.
You need to research how well the economy would be performing without all of the government stimulus and related programs.
I should absolutely be but I’m not. First order of business is react before everyone else reacts. If you do not do this then yes, you will be worse off. This is real simple though. Once the gubment starts printing and handing out money for nothing you need to start doing something. It might be buying 10,000 home hepa HVAC filters and selling them for a small profit later…I’m kidding but you could have actually done just that and made some coin.
My point however is you have to move when this BS starts. Do that and you will be better off under any system. Ignore the politics. Focus on the printing. If it gets out of control (like now) you should not be worried about it if you reacted before it fully kicked off..like buying a second home when rates were LOW. How about that.
Free entertainment on Chicago Michigan Avenue “Mag Mile” in front of the Marriott –
https://cwbchicago.com/2024/05/chicago-magnificent-mile-knife-altercation-no-injuries.html
Not even summer yet.
something like that happens across America almost every day, it only gets in the news when it’s chicago, new york or los angeles for some reason.
“Everyone is better off now. We’ll except my son Beau who died a hero in the war.”
Cornpop was a bad dude. But I took him just like I’ll take anyone that doesnt believe they are better off now. You’re reading the charts wrong jack.”
FJB and the rest are gaslighting us
EVERYONE I know both young and old are worse off by A LOT. Their ballooned paper equity may feel good but we all see our expenses up over 100% and we/they are all pissed. We DO NOT DESPISE the FED and “our” government criminals enough.
Yes, right now it’s better to own than to rent, but even ownership gets painful for a lot of folks.
Home equity is useless unless you’re desperate, but if you need cash out now, you’re paying through the nose. That’s a double whammy in time of need.
Meanwhile, the house isn’t any bigger or better, but now your maintenance, insurance and tax costs are all soaring.
Even the people who refi’d into better lifestyles during the bubble are pissed off now, because they thought they’d locked in good times with a lower monthly payment, and now their lives are being eroded by higher costs.
It’s one thing to be in tough shape because you’re not earning as much, but often you can fix that yourself. What really hurts is when you actually are earning more and more, but yet you cannot keep up with rising bills, and you’ve got no options to offer your spouse and kids!
I’m amazed the number of people that don’t have 3 months of savings. I know some people aren’t able to save but there are a lot of others that don’t budget properly. They spend on frivolous things because they aren’t thinking of unexpected expenses that may arise in the next few years. This is why Trump will win by a landslide.
Save? The young are literally blowing money on Draftkings and 0DTE options every week because they are desperate and degenerate gamblers that have NO HOPE for the future so they gamble to try and hit the trifecta and get out of poverty/desperation
How are you supposed to save when going to multiple Swift concerts is so expensive?
Up about 100k. I’ll live.
In 2021 everyone was getting thousands in free money, sometimes 10’s of thousands via unemployment checks.
“Biden keeps telling people they are better of. Some are but over 30 percent of respondents say they are worse off.”
The “Some are = 70 percent” (better off)
The “worse off = 30 percent” (worse off)
I’m confused, I thought Biden was a bad president? I agree that the Fed has us living in bizarro world but now some of these posts are taking us there too.
MPO you know better that to post such BS.
30 Percent worse off does not imply 70 percent are better off.
They could be no better off.
Stop being an ass because I believe you know better,
Economics is a … “science”. The economic scientists, the hierophants of leveraged money, are really masters of marketing, or what Freud’s nephew Bernays called “public relations.” They are having relations with the public, or shtupping them. Empiricism requires the collection of evidence, what we now call data in the ubiquity of statistical models, but also requires a hypothesis which is falsifiable since we are finite beings in a finite world. It only takes one black swan coming over the hill to nullify the universal truth of the white swan (Hume).The perverse drift into Bernays’s world leaves empiricism behind. Data is manipulable, as is the “narrative” or propaganda which dismisses any actual data and shapes everything into a certain point of view, to the benefit of some. You can eat a can of dog food, turn on the news, and listen to a talking head tell you how much better off you are than before, when you ate steak.
“Over 60: In 2019, 11 percent said they were financially worse off. In 2023, 29 percent said they were financially OK. That’s a rise of 18 percentage points.”
Mish, in all of the bullets under section for “are you worse off…” shouldn’t the 2nd sentence be “financially worse off” vs “financially ok”?
I revised a title of a chart so I may not have revised the corresponding text. Will check.
Thanks.
Yes that entire first block of bullet points was incorrect. I copied from another set and only fixed half the bullet point sentences.
Thanks Mish!!!