Nearly 1 in 4 US Households Living Paycheck to Paycheck in 2025
The study found that nearly a quarter of households spend over 95% of their income on essentials, a figure that highlights the growing gap between lower- and higher-income Americans, as per the report. Joe Wadford, an economist at the Bank of America Institute, explained that, “Higher income and lower income households are living in two different worlds,” as quoted by CNN.
Lower vs Higher-Income Americans: A Growing Financial Divide
For many, the struggle is compounded by stagnant wages. Middle-income households saw after-tax wages rise only 2% year-over-year in October, below the 3% inflation rate, while lower-income households saw just a 1% increase, as per the report. In contrast, high-income households enjoyed a 4% increase in wages, keeping them ahead of rising costs, as per CNN. For low-income Millennials, wages have inched up only 1% compared with 6% for their high-income peers, reported CNN.
Stagnant Wages Leave Many Struggling to Keep Up with Rising Costs
According to the CNN report, Austin H., 34, knows this reality all too well, living paycheck to paycheck with almost no savings, Austin supports his partner, a veterinary student, while facing his own student debt. The construction company where he works is shutting down, leaving him without a safety net in the coming months, as per the report.
He said, “To be 34 and living paycheck to paycheck with no savings, things are pretty crappy right now,” adding, “We want to own a house and start a family, but I don’t know how we will ever get our feet under ourselves,” as quoted by CNN.ALSO READ: Trump plots major tariff cuts to slash soaring grocery bills for millions of Americans
US Consumer Debt Signals Rising Financial Strain
The affordability crisis is also evident in consumer debt. Fitch Ratings reports that 6.65% of subprime borrowers were at least 60 days late on car payments in October, the highest level since tracking began in the early 1990s, as per the report. Many households are also making only the minimum payments on credit cards, showing growing financial strain, as per the CNN report.
Economists Warn of Potential Slowdown in Consumer Spending
Economists warn that these pressures could have ripple effects on the broader economy, as per the report. Gregory Daco, chief economist at EY-Parthenon, noted that households living paycheck to paycheck may spend cautiously, weakening the foundation of a consumer-driven economy, as per the CNN report.
Goldman Sachs Predicts Risk of Higher Unemployment
Meanwhile, Goldman Sachs economists estimate a 20% to 25% chance that US unemployment rises by at least 0.5 percentage points in the next six months, reflecting the growing risk of a labor market slowdown, reported CNN.
FAQs
How many Americans are living paycheck to paycheck?
About 24% of US households are struggling to cover necessities without extra savings, as per the report.
Who is most affected by living paycheck to paycheck?
Lower-income households and young adults are the hardest hit, as per the report.
