Inflation calms down, 3-class division, US rents rise, job insecurity, poverty increases
As inflation calms down in the US economy, the legacy of interest rate cuts has led to the division of the 3-class into the wealthy, upper-middle class, and the poor, and the 'poverty index', which suffers from absolute poverty due to rising rents and job insecurity in the US, has risen.
The New York Times reported on the 23rd in six snaps the scene of expanding poverty where the middle class is suffering from real instability due to the legacy of inflation and high interest rates, and homeless shelters are newly established due to the anxiety of high prices.
While wages in the US middle class have risen faster than overall inflation over the past year and a half, heavier food and rent bills are still a burden for many families.
The NYT stated that "the poor, in particular, tend to spend more on such necessities," and "for those who do not work full-time, including those with reduced or unstable work hours, it can be difficult to meet basic necessities even with higher wages." “The demand for food assistance skyrocketed when the pandemic began, and now the high cost of food has not gone down,” Jonathan Tetrault, vice president of community affairs for the Greater Boston Food Bank, told the Times. “It’s very hard for low-income people to make ends meet, and they’re struggling to balance the high cost of groceries with the high cost of housing and other essentials like medicine.” The Boston Food Bank has distributed more than 100 million pounds of food each year since 2020, up from less than 70 million pounds in 2019.
The poorest people in the country have had a particularly hard time amid the surging inflation, and the high cost of living has made many middle-class workers feel anxious and their salaries feel uncomfortably low.
In Atlanta, homeless shelters are seeing an increase in cases of people abandoning their homes to face rising rents. The roughly 800 beds in the Atlanta Mission’s network of homeless shelters have long been full, and the pandemic has seen more and more first-time homeless people take their place, rather than the chronically homeless.
Many have jobs but have simply become homeless because they can’t make ends meet.
“What we hear from our clients is, ‘The rent went up. It’s just too much,’” Tensley Almand, the organization’s chief executive, told the Times. “We’re hearing over and over again about the number of people who are underemployed. They’re just not employed enough to cover their expenses.”
“Inflation has plagued the U.S. economy for years, but as inflation has eased, the concern has shifted to another enemy: unemployment,” ABC News reported on the 23rd. “Employment remains strong, but has slowed sharply from the peak it reached as the country recovered from the pandemic, and the unemployment rate, while still near historic lows, has risen markedly this year.” The mixed signals from the U.S. labor market during a period of calming inflation are clearly raising important questions for tens of millions of workers and millions more looking for work.
“Despite the low unemployment rate, more than 10 percent of Americans are not finding enough work,” Julia Pollak, chief economist at Zip Recruiter, told ABC News on Tuesday. “That means they are either working part-time, temporary jobs, but wanting full-time jobs or they have stopped looking for work and are out of the labor force.”
“Some economists say a recession indicator known as the ‘Sahm Rule’ generally precedes a recession when the unemployment rate rises by half a percentage point over a 12-month period,” ABC reported. “What we see in the data, with the Sahm Rule, is that when unemployment starts to rise, it usually has a lot of momentum and it takes a while to stop,” Nick Bunker, director of North American economics at Indeed Hiring Lab, told ABC News.
In contrast, the wealth of middle-class and above-average households in the U.S. has mostly grown over the four years since the brief pandemic recession.
This was fueled by rising retirement accounts and real estate values, helping families across the income spectrum, with the biggest dollar gains for wealthier Americans, the Times reported, pointing to the widening wealth gap left by the pandemic.
The U.S. poverty rate plummeted early in the pandemic as government-led stimulus, additional unemployment insurance, and expanded tax credits for low-income families helped vulnerable households, but now that government support has disappeared as inflation continues to rise, and absolute poverty has emerged.
The U.S. Census Bureau reported on the 10th that the nation's poverty rate increased in 2023 despite improved incomes, and the percentage of Americans living in poverty will increase from 12.4% in 2022 to 12.9% in 2023.
The New York Times reported on the 10th that "child poverty was cut in half in 2021, the lowest rate since records began in 1967, thanks to stimulus checks, additional unemployment insurance, and expanded tax credits for low-income families, but the increase reversed in 2022 as aid expired and prices for food and other essentials soared." "The poverty level rose again after a wave of pandemic relief aid and an exceptionally strong labor market that boosted wages for many at the bottom of the wage spectrum in recent years collided with the sharpest inflation in a generation." The U.S. Poverty Report is released with estimates of two poverty measures: the official poverty measure and the Supplemental Poverty Measure (SPM), which has been in place since the 1960s and defines poverty by comparing pre-tax cash income to a national poverty threshold adjusted for family composition.
The Bureau of Labor Statistics (BLS) released the SPM in 2011 and includes several government programs that are not included in the official poverty measure calculation to support low-income families.
The SPM takes into account geographic differences in housing costs and includes federal and state taxes, work costs, and medical expenses when calculating the poverty threshold.
The decline in housing affordability and the rise in rents in the U.S. reflect historically low housing affordability due to high mortgage rates and limited housing supply.
In the U.S., home prices and rents have risen faster than average wages since roughly 2012.
While average weekly income in the U.S. has increased 22% since the beginning of 2020, rents have increased 24%, and home prices have surged by about 50%. The New York Times reported on the 30th of last month that “the rapid rise in home prices has collided with high interest rates, pushing home purchasing power to historically low levels.” Unlike the US and Japan, the Bank of Korea and Statistics Korea exclude ‘ownership costs’ from their consumer price indexes, so they usually announce prices about 30% lower.