Strong Job Market Staves Off Some Inflation Concerns, But For How Long?
Amid high inflation, Americans are starting to dip into their savings – Forbes Advisor

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Americans are dipping into their savings to manage continued inflation. But doing it now could have a long-term impact on their financial health.

According to the latest Forbes Advisor-Ipsos Consumer Confidence Biweekly Tracker, 20% of Americans have taken more out of their savings in the past few months than they usually do. And 20% said they spent more money in the past few months than usual.

These rates have been stable since Forbes Advisor and Ipsos first asked participants about their spending and saving habits in December, indicating that households continue to turn to savings to manage rising costs. .

However, 21% of respondents said they repaid their loans or credits less than usual.

The pollconducted by Ipsos, measures consumer sentiment over time.

Chris Campbell, chief strategist at business risk advisory firm Kroll, says direct assistance to American households during the pandemic has given the average American family a bit of a savings cushion. But people started tapping into their savings accounts in the later stages of Covid last year.

“The average American family has to make tough decisions,” says Campbell. “They are not better paid, but they face [price] increase in basic necessities, such as gasoline and food.

Read more: Gas prices soar over $4 per gallon. Here’s how to save at the pump

High gasoline prices continue to strain consumer budgets. Digital wealth management firm Personal Capital says its average user spends $14 more every time they fill up at the pump, based on anonymized data provided to Forbes Advisor.

Keri Danielski, head of communications for personal finance management firm Mint, also noted an increase in gas and fuel expenses among Mint user data. But not all users feel these price increases at the same level. “[Locations] where spending has fallen are largely metropolitan areas where public transit and other alternatives to driving, such as carpooling, are common,” she says.

Americans who don’t need to spend on gas may still feel a pinch from rising utility costs. There was a 9% increase in electricity costs between February 2021 and February 2022.

As the Federal Reserve raises rates to curb inflation, Campbell says external factors such as supply chain issues and Russia’s war on Ukraine are beyond the Federal Reserve’s control. And they contribute significantly to higher prices in certain categories, such as fuel.

Job optimism continues to boost overall consumer confidence

But even though inflation is likely to persist for some time, consumers are still optimistic. The Ipsos jobs index rose about a point to 67.3 this week, and that’s the highest of any subcategory in the survey.

Today, the Department of Labor announced the unemployment claims filed last week fell to its lowest volume since 1968.

And although the March unemployment rate fell slightly, returning to pre-pandemic unemployment levels.

Consumer confidence in their job security and job prospects has held up over the past few months.

Although initial wage spikes as the economy reopened after Covid shutdowns have subsided, Campbell says high wages and ample job opportunities are helping many households manage rapid inflation.

But if job growth slows, Campbell warns, wages usually end up falling as well. After all, if a lot of people are looking for work, employers may not need to offer competitive salaries to attract applicants. If that happens, many Americans could find it even harder to find the money they need for essentials.

And if Americans dip into their savings accounts now, making ends meet could become more difficult as inflation drags on. Rising central bank rates will raise interest rates on credit cards and loans, just when some households might need to turn to these tools to make ends meet.

Survey methodology: Ipsos, which polled 933 respondents online on April 4 and 5, provided the results exclusively to Forbes Advisor. The survey is conducted every two weeks to track consumer sentiment over time, using a series of 11 questions to determine whether consumers have a positive or negative view of the current state of the economy and its future development.


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