VTIP - Fewer Americans live paycheck to paycheck but trouble brews for millennials - report

2023-04-30 16:33:00 ET

The share of U.S. consumers who were stretched too thin slipped to 60% in March from 62% in February and from 64% in the year-earlier period, digital marketplace bank LendingClub ( NYSE: LC ) said in a report this past week, as they seemingly continued to find ways to make ends meet amid ongoing inflationary pressures .

In another positive sign, a smaller percentage of those consumers (18%) reported struggling to pay their bills in March, down six percentage points from last year and nine percentage points since 2020, perhaps as some consumers reduced their living expenses and/or picked up a second job in the face of higher inflation, rising interest rates and a looming recession.

The paycheck-to-paycheck landscape varied greatly by age group, though, with millennials having the toughest time adapting to a higher cost of living. The report found that 73% of that generation, between financially supporting both their aging parents and their children, lived paycheck to paycheck. “The oldest millennials are in their 40s now and often managing expenses for not just their kids but also aging parents,” said Anuj Nayar, financial health officer at LendingClub ( LC ).

By comparison, 66% of Generation Z saw their budgets squeezed, up eight percentage points from a year ago, and 50% of baby boomers and seniors lived paycheck to paycheck, down four percentage points from March 2022.

Many of the Gen Zers are early in their careers, so they “are more apt to face financially life-altering events such as job loss, making them more financially vulnerable than any other generation,” Nayar noted. Still, “with over half living with their parents or siblings, they can hopefully better absorb shocks to any temporary disruption in income.”

LendingClub's ( LC ) report is based on a census-balanced survey of 3,363 U.S. consumers conducted from March 8 to March 17, in addition to analysis of other economic data.

Overall, consumers' purchasing power has improved in the months following peak consumer price inflation, with real disposable personal income up 4% Y/Y in March, according to data from the St. Louis Fed's FRED database. Even so, interest rates are at their highest in over a decade, hampering lower-income consumers' ability to take out a loan to buy a home or finance a vehicle, and the Federal Reserve is poised to ratchet up rates even further with inflation still persistently above target.

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More on the cost-of-living issue

• Inflation Fell But Prices Are Rising
• March core PCE price index inflation holds steady, as expected
• Long-term mortgage rates increase for 2nd straight week, but expected to decline through 2023
• Should the Fed surprise the markets with a strategic pause?
• Home prices resume rise in February: S&P CoreLogic Case-Shiller Index

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