Inflation, Underemployment, Crime, Rising Mortgages, Political Polarization Take Their Toll On American Life

The U.S. economy is still growing. Americans find it easy to get jobs. The unemployment rate hovers at a 50-year low.

Yet, half of Americans feel worse rather than better off.

According to a recent Gallup report, only 35% of Americans are better off financially this year compared to a year ago. In comparison, 50% are worse off—like the Great Recession era in 2008 and 2009.

Konrad Petaitis, Lead Americas Analyst, blames inflation for this disconnect between an improving economy and a deteriorating financial state of American families.

"The largest driver behind the polling results is inflation, which, unlike other macroeconomic metrics such as capital investment, tend to have a day-to-day impact on people," he told International Business Times. "They see it daily at the gas pump or in the supermarket."

"The year 2022 was a dumpster fire," added Dan North, Senior Economist at Allianz Trade, who also sees the 40-year high inflation as a prime driver of how Americans felt in 2022 compared to the previous year. "Of course, some of the necessities of life were among the hardest hit, including food which peaked at 11.4% in August, shelter reaching 7.5% y/y in December 2022 and still rising, while gasoline peaked at an incredible 60% y/y in June. Since these are items that most people can't cut from their budget, inflation hit the lowest income brackets the worst."

Furthermore, North sees housing affordability hit a record high (to that point) in 2012 vs. a 37-year low in 2022, adding to the anxiety of American families in paying the monthly bills.

"The 30-year mortgage had been falling through 2012 from 3.9% to 3.5%, whereas in 2022 it rose from 3.5% to 6.4%, hitting a peak at 6.9% in October," he said.

Petaitis sees a couple more factors that have aggravated the impact of inflation on American families, like underemployment.

"The percent of people employed part-time but preferred to be working full-time – or other measures of under-utilization have remained largely stable since early 2022," he explained. "It undercuts the narrative that the U.S. is enjoying a pretty robust labor market."

Then there's political polarization that has reached levels not seen since the 1970s.

"Both parties have moved away from the political center ground, and the number of "moderate" congresspeople has also declined significantly," Petaitis said. "This issue is important because partisan individuals are now more likely to see policies implemented by the rival party as negative or detrimental to the wider country. Political polarization is particularly relevant when discussing issues with a wider partisan divide such as immigration, protecting the environment, Covid-19, and budget deficits."

Still, there are rising crime rates in major urban centers in the U.S., as both the Republican and Democratic parties admit.

"Roughly 6 in 10 Republicans and 4 in 10 Democrats say that reducing crime should be a top priority for the government," Petaitis added.

Pavel Bahu sees American families' financial situation worsening next year if the U.S. economy slips into a recession.

"A recession will impact our savings and finances – now, the rising cost of living has impacted us and made our disposable income significantly smaller," Bahu added.