US households felt financially afloat in 2022, Fed survey finds

May 23 (Reuters) – U.S. households reported their highest level of financial well-being since tracking began nearly a decade ago and the gains were felt across all racial and ethnic groups, a report showed of the Federal Reserve published on Monday.

The US central bank’s annual survey of the economy and household decision-making also showed that workers were reaping the benefits of working from home even as the recovery from the coronavirus pandemic continued, with little fervor. to return to the office and general optimism about the job market.

The report provides “valuable insight into financial conditions for Americans in late fall 2021,” Fed Governor Michelle Bowman said in a statement.

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The report is based on responses from 11,000 adults in October and November 2021, before an increase in COVID-19 cases due to the Omicron variant that briefly slowed economic growth, but is consistent with data showing that Americans in general have seen an improvement in their finances. over the past two years.

This is tied to a combination of pandemic-era direct cash payments and enhanced unemployment benefits that have cushioned the economic blow of the pandemic on Americans in 2020 and part of 2021, rising prices of assets, as well as a tight job market that is fueling high wage gains.

Fed officials added that the sharp increase in the number of children attending in-person schools and the temporarily enhanced child tax credit passed earlier in 2021 also likely contributed.

Some 78% of adults said they were living comfortably or doing “well” financially, up from 75% in 2020 and the highest level since the survey began in 2013.

Financial well-being increased among all racial and ethnic groups, with a notable jump among Hispanics.

The share of Americans who said they would be able to cover a hypothetical emergency expense of $400 with cash, savings or a credit card paid on the next statement also hit the highest level since the start of the survey, at 68% compared to 64% in 2020. .

Fed officials said the increase was consistent with longer-term improvements in financial well-being as well as factors such as larger bank account balances and possible financial relief measures.

NUMBER OF JOBS

The Fed is currently trying to contain inflation which is at its highest level in 40 years, and it pivoted late last year to a more aggressive monetary policy after two years in which it had deliberately maintained financial conditions. flexible to protect the economy from the worst of the pandemic.

The central bank began its tightening cycle in March and has already raised its benchmark overnight lending rate by 75 basis points as it tries to dampen demand from US consumers who still have purchasing power. despite soaring prices exacerbated by the depletion of supply chains caused by the war. in Ukraine and periodic pandemic-related closures in China.

The Fed is keeping a close eye on the US unemployment rate, which at 3.6% currently is back near pre-pandemic levels.

The Financial Wellbeing Report showed that at the end of last year, when the unemployment rate was even higher, 15% of workers said they had changed jobs in the past year. and that most of those who did said the job change was an improvement.

About 22% of employees were working from home in the fall of last year, up from 29% the year before, and well above the 7% who were working entirely from home before the pandemic.

Most workers said they wanted to continue doing so, citing better work-life balance, and said they would be about as likely to look for a new job if forced to return to the office as if their employer implemented a wage freeze, the Fed report said.

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Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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