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Though unemployment is low and inflation is cooling, consumers still feel some strain

LEILA FADEL, HOST:

Americans are now enjoying cooling inflation and low unemployment, but still, many are struggling financially. Our colleagues over at The Indicator from Planet Money, Wailin Wong and Adrian Ma, look at three ways consumers are feeling the pinch.

WAILIN WONG, BYLINE: Economist Peter Ganong is a professor at the University of Chicago, and he says the median household saw its bank account balance go up by a whopping 50-60% at the start of the pandemic.

PETER GANONG: The next three years has basically been gradually returning to normal.

ADRIAN MA, BYLINE: In other words, people are spending down those fattened bank account balances. At the same time, the last couple years of high inflation have eroded their purchasing power.

WONG: And Peter says the increase in people's real income is slowing down. That's income with inflation taken into account.

GANONG: Either spending growth has to slow down or we will see people draw down their savings and increase their borrowing in various ways.

MA: The New York Fed tracks household debt, and it found, in the fourth quarter of 2023, credit card balances hit a record $1.1 trillion. And that brings up our first area where consumers are feeling the pinch - credit card delinquency rates.

WONG: The New York Fed says that in the fourth quarter of 2023, more than 6% of credit card balances fell into what's called serious delinquency. That means they're at least 90 days behind. Delinquency rates for credit cards are back on the rise, after falling during the early part of the pandemic.

MA: Researchers at the New York Fed said their data on credit card delinquencies is a signal of increased financial distress, especially for younger and lower-income households.

WONG: Our second example of consumers feeling the pinch - falling sales at Family Dollar.

MA: Family Dollar's parent company recently released its quarterly earnings report.

WONG: And the company said that same-store sales fell 1% in the latest quarter from a year earlier. In that same report, it named a culprit, a reduction in SNAP benefits, formerly known as food stamps.

MA: During the pandemic, SNAP recipients got a temporary boost in benefits. This extra money stopped in 2023, though.

WONG: Karen Gardner is a senior policy associate at the Center for Science in the Public Interest.

MA: Karen worked on a 2022 survey of SNAP recipients and low-income consumers who live near dollar stores, and the survey showed that most of these shoppers were buying food at dollar stores to stretch their budgets at the end of the month.

KAREN GARDNER: When budgets are even tighter, they are making really hard choices about what to feed their families.

MA: Our third and last indicator has to do with a specific kind of savings, retirement savings.

WONG: Vanguard recently reported that 3.6% of its customers with retirement plans initiated a hardship withdrawal in 2023.

MA: It's up from 2.8% in 2022, and Vanguard says the increasing rate of hardship withdrawals could signal financial stress.

WONG: Here's where it gets a little complicated. Economist Peter Ganong says more employers are now automatically enrolling their workers in 401(k) plans.

MA: Meanwhile, Congress has made requesting hardship withdrawals easier for customers.

WONG: Peter says more data is needed to know how worried we should really be.

GANONG: It makes it harder to interpret this as, like, an indication of stress, unless you account for all these sort of institutional changes that are going on in the background.

WONG: Wailin Wong.

MA: Adrian Ma, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Wailin Wong
Wailin Wong is a long-time business and economics journalist who's reported from a Chilean mountaintop, an embalming fluid factory and lots of places in between. She is a host of The Indicator from Planet Money. Previously, she launched and co-hosted two branded podcasts for a software company and covered tech and startups for the Chicago Tribune. Wailin started her career as a correspondent for Dow Jones Newswires in Buenos Aires. In her spare time, she plays violin in one of the oldest community orchestras in the U.S.
Adrian Ma covers work, money and other "business-ish" for NPR's daily economics podcast The Indicator from Planet Money.
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