Salaries of 71% of Americans do not follow inflation, shows BofA

There is mounting evidence that Americans are struggling to keep up with inflation.

Nearly three in four (71%) employees say the cost of living is exceeding their pay, according to a Bank of America-sponsored survey shared first with CNN this Tuesday (27). In February, the figure was 58%.

The survey — which was conducted in July and surveyed people who participate in 401(k) plans, a type of employer-sponsored U.S. pension — reported that half of employees said they had taken steps to deal with financial problems in the past six months.

Among them, 21% say they are using emergency savings to pay bills, 21% are working overtime, 20% are looking for a better-paying job, and 6% are turning to 401(k) withdrawals.

The Bank of America survey found that despite being employed, 62% of workers are stressed about their finances.

“The main contributor to this stress is inflation,” said Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America.

The findings paint the picture of a workforce that is under significant financial pressure – despite evidence of an expanding labor market and resilient consumer spending.

Stubbornly high inflation is eroding paychecks and darkening consumers’ moods.

While gasoline prices have declined in recent months, prices for food, rent and utilities remain high.

Overall, consumer prices rose 8.3% year-over-year in August, according to the Bureau of Labor Statistics. That’s not far below the 40-year high of 9.1% set in June.

The job market, on the other hand, is booming, at least for now. The unemployment rate fell in July to 3.5%, the lowest level since 1969. Hiring remains strong and layoffs are relatively uncommon.

However, even the Federal Reserve is warning of job losses ahead as it tries to combat high inflation with massive interest rate hikes.

Financial well-being hits five-year low

The percentage of employees who feel good financially has dropped to 44% in the Bank of America survey. This is the lowest level in five years and significantly below February’s 57% level.

The deterioration was most pronounced among minorities. Only 32% of black employees said they feel financially good, down from 50% in February.

One in three Hispanic employees indicated they feel financially good, down from 47% in February.

Sentiment about financial well-being among younger Americans has soured the most. Generation Z and Millennials (ages 18-44) saw a decline of 15 percentage points, compared with 10 points for those age 55 and older.

In this context, many Americans considered quitting their jobs.

The Bank of America survey found that 21% of employees have considered changing jobs and 9% have done so. The main reasons for quitting were compensation, burnout, and work-life balance.

The economy is likely to be a key issue in this autumn’s midterm elections.

Only one in four Americans say the economy is in “good” or “excellent” condition, according to a Washington Post/ABC News poll released over the weekend. About three in four Americans say the economy is “not so good” or “bad.”

Bypassing utility bills

High energy prices continue to cast a shadow over the economy.

Americans have been dealing with the shock of the label, as high prices for natural gas and coal, along with high demand amid heat waves, pushed up utility bills this summer.

A separate Bank of America report found that the average monthly payment for utilities rose 16.3% year-over-year in August.

Utility bills have increased so much that some families are struggling to pay. A Bank of America survey of consumers found that 17% of households had missed or made a late payment on utilities.

That number rises to 25% for those earning less than $50,000.

If utility prices remain high, the Bank of America warned, these families “may be pressured to make cuts to their other spending to keep the lights on.”