How Do Americans Feel About Their Finances? It’s Complicated
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Access to affordable credit helps me pay my employees, but I don't really need it. Inflation is killing me. But who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill. See? Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits. They deserve it, don't they? Tell Congress, stop the Durbin Marshall money grab for corporate megastores. Paid for by the Electronic Payments Coalition.
Here's your Money Briefing for Tuesday, September 10th. I'm J.R. Whelan for The Wall Street Journal. Ask your friends or neighbors, how you doing? And their answer might depend on the state of their finances.
Consumer sentiment has improved in the past two years as inflation has cooled off. But I think the instrumental thing to focus on in terms of people's psychology is just how prominently inflation looms in people's minds. Even if their pay is going up
We'll talk to Wall Street Journal personal finance reporter Joe Pinsker after the break.
Are you better off than you were five years ago? Salaries have risen since 2019, but that's not the full picture. Wall Street Journal personal finance reporter Joe Pinsker joins me. Joe, you and the personal finance team looked at snapshots of people's personal finances today as compared to 2019. Why go back to 2019?
it remains this really powerful anchor point mentally for people to compare back to. It's a time before the pandemic. It's also a time before really high inflation. And it's a time when people felt pretty good about their finances. So even though it's sort of receded into the past time-wise, it's still pretty mentally present for people.
How scary is that that five years ago seems like ancient history?
It's a little bit unbelievable.
In your story, it says Americans have more money in the bank and slightly less credit card debt relative to income compared to 2019. Why don't they feel better off than they did five years ago?
A lot of it comes down to inflation. And so in the consumer sentiment data that we can look at, people are not feeling as good about their money right now as they did in 2019. But that said... consumer sentiment really fell to a recent low in 2022. And it's rebounded quite a bit since then. So people have been feeling a bit better as inflation has cooled, but the pain is still present, especially relative to 2019.
And credit card debt relative to income has fallen and then risen since 2019. What's driven that increase?
During the early phases of the pandemic, people's spending contracted. They had fewer things to spend on and they were able to pay down more of it. So Americans' credit card debt relative to income actually fell in 2020, in 2021. But since then, it's ticked back up and it's increased. But at the same time, it's more or less on par with what it was in 2019. So we're kind of, quote unquote, back to normal on that.
You cited data from the Labor Department that says that Americans are making a bit more money than they did in 2019. And that's even after adjusting for a sharp increase in inflation since then. Has that brightened people's sentiment any about their finances?
In some way, yes, because consumer sentiment has improved in the past two years as inflation has cooled off. But I think the instrumental thing to focus on in terms of people's psychology is just how prominently inflation looms in people's minds. Even if their pay is going up, the fact of higher prices is probably just going to weigh a bit more. And so the idea of making more money but then having it eroded by higher prices is just kind of frustrating.
During the pandemic, we saw the savings rate jump as a result of people in lockdown and not going out shopping, but also government stimulus payments coming in. How has the savings rate fared since then?
The saving rate is a lot lower than what it was during the pandemic, and it's even notably lower than what it was throughout 2020. 2019. And that may sound like a worrying thing, like people aren't able to put away money.
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