Paycheck-to-Paycheck Consumers May Have Reasons for Optimism, Data Shows

Consumers with difficulties making ends meet may have a reason to be optimistic, recent PYMNTS Intelligence data shows.

Looking at the U.S. population according to financial lifestyle, the PYMNTS Intelligence “New Reality Check: The Paycheck-to-Paycheck Report” identifies three different sets of consumers: those who live paycheck to paycheck and have difficulty paying bills at the end of the month (also named as struggling consumers); those who live paycheck to paycheck but have no issues paying their bills; and those who do not live paycheck to paycheck, meaning they do not experience any difficulty in making ends meet.

Examining the evolution of each group over time, it can be seen that, at least in the case of the latter two, there are no major fluctuations over the long run. If we discount the seasonal effect, those who live paycheck-to-paycheck without issues paying bills are historically around 42%, while those who do not have any difficulties are in the 35% to 38% range. It is the first group, the struggling consumers, who show the greatest oscillation. Being the most vulnerable cohort, they are more affected by the overall economic evolution. The good news is that the size of this group in the whole country has been reduced since the end of the pandemic, recording the lowest level in November. Specifically, the share of struggling consumers reported in the PYMNTS Intelligence study reached 19.7% as of November 2023, which means a 0.5 percentage points decline year over year, and 4 points down from November 2020.

This evolution is in line with recent economic news. The Fed’s main inflation measure, the personal-consumption expenditures price index, fell 0.1% in November from the previous month, the first decline since April 2020. On the other hand, the labor force participation rate for workers between the ages of 25 and 54 was recorded at 83%, a share that is near the highest in more than two decades. In addition, overall personal income was up 0.4%, better than 0.3% in October.

In sum, increased wages and robust employment opportunities encouraged more people to get off the sidelines. Struggling consumers, after dealing with crushing inflation pressure and recession fears over the past two years, are adopting a sunnier outlook.

About the Numbers

“New Reality Check: The Paycheck-to-Paycheck Report,” is a PYMNTS Intelligence and LendingClub research series in collaboration that examines the financial lifestyles of U.S. consumers and explores their credit patterns. The latest edition of the series, “The Credit Card Use Deep Dive Edition,” draws on insights from a survey of 3,252 U.S. consumers conducted from Nov. 6 to Nov. 22 and an analysis of other economic data.