A report from the Brookings Institution, released Wednesday, found that 45.5% of U.S. households did not earn enough income in 2024 to cover basic necessities such as food, housing, healthcare, transportation, and childcare.
This data was released alongside a separate U.S. Labor Department report showing that consumer prices rose by 2.7% annually through November, and a New York Fed survey indicating food insecurity has reached levels not seen since 2020.
Affordability and Household Income Gaps
The Brookings report compared household incomes with estimated costs of essentials at the county level. Key findings include:
- A $1,000 increase in annual living costs would push an additional 3 million households into an inability to meet expenses.
- The report attributes the gap between wages and inflation to the situation, noting that wages rose 1.3% while inflation was 2.9% in 2024.
- Over 50% of families in New York state could not afford necessities. In Washington, D.C., over 60% of residents could afford them, but Black residents were 20 percentage points below the city's baseline, while Hispanic households were 3 percentage points above.
- From 2014 to 2024, more than 40% of households faced this challenge annually, with the exception of 2021 and 2022, when federal pandemic aid boosted incomes.
- Economic pressures intensified after pandemic assistance expired and inflation spiked in 2022.
A New York Fed survey released Wednesday found that food insecurity in the U.S. reached levels not seen since 2020. Bank of America Institute reported that year-over-year spending in April was up 4%, excluding gas. The Brookings report estimated that raising wages by $10 per hour would lift nearly 38 million households' ability to cover essentials.
Inflation and Consumer Prices
Consumer prices in the U.S. increased by 2.7% over the 12 months ending in November, according to a Labor Department report released on Thursday. This represents a moderation from the 3% annual inflation rate recorded for the 12 months ending in September. Between September and November, prices rose by 0.2%.
The Labor Department did not provide an October comparison for consumer prices. This was attributed to a government shutdown that prevented workers from conducting standard price checks during that month. Omair Sharif of Inflation Insights has suggested that the absence of October rental data might have contributed to a lower November inflation figure.
Inflation data also showed that increases in the cost of rent and electricity over the past year were partly offset by price reductions in some food categories, such as eggs.
Public Sentiment and Economic Concerns
A recent NPR/PBS News/Marist poll indicates that 36% of Americans approve of President Trump's economic management. This marks his lowest rating on the economy in six years of polling, aligning with former President Biden's low score in 2022. The poll also found that 71% of respondents reported their income either matched or fell short of their monthly expenses.
The NPR poll revealed that 45% of respondents identified high prices as their primary economic concern, while 10% were most worried about job security.
Wages and Labor Market Conditions
Workers' wages have, on average, continued to increase faster than prices. However, the pace of wage gains has slowed in recent months. With a softening job market, workers' leverage for demanding higher pay has decreased.
Income growth from 2025 to 2026 was 6% for higher-income families but only 1.5% for lower earners, according to the Brookings report.
Federal Reserve Governor Chris Waller commented on Wednesday at Yale University's CEO Summit, stating that employers are less likely to grant pay raises in the current environment. Waller further noted that high-income households appear less affected by rising prices and maintain high spending levels. Conversely, he described low- and middle-income families as facing an "affordability problem," saying, "Either the wages have to start going back up, or we have to think about trying to get inflation to come down, so prices at least stop going up."
Federal Reserve Actions and Outlook
Last week, the Federal Reserve voted to reduce its benchmark interest rate for the third time since September, a measure aimed at supporting the job market. Despite this, members of the rate-setting committee indicated a cautious approach to further rate cuts.
Governor Waller expressed confidence that inflation will moderate in the coming year. However, not all Federal Reserve policymakers share the same outlook. Inflation has consistently exceeded the central bank's 2% target for over four years.
Raphael Bostic, the outgoing president of the Atlanta Federal Reserve Bank, emphasized his concern that prolonged elevated inflation could lead the public to expect continued rapid price increases. Bostic stated, "I get paid to worry. I don't want anyone to think I'm cavalier about our credibility" regarding inflation control.