Last month, Kris Massey found herself at a jewelry counter, aiming to pawn a few pieces gifted by her grandmother, hoping to perhaps cover some mounting bills.
Despite earning a six-figure salary annually, Massey, a 57-year-old nurse practitioner, has found her financial situation untenable. Years of rapid price increases, coupled with a recent, multi-month stretch of unemployment, have taken their toll.
She had been working two jobs from 2012 to 2023, but the second job is no longer feasible following a major back surgery. Her retirement savings, already depleted, vanished when she became unemployed.
“I’m just trying to keep afloat,” she told CNN.
While the colossal engine of the U.S. economy continues to chug along, weathering blow after blow, the same cannot be said for some of its most vital internal components, which are now showing signs of strain: a growing number of Americans, whose labor and spending help power this engine, are reaching a financial breaking point.
Already grappling with the escalating effects of over five years of high inflation, they are now facing a cost-of-living crisis exacerbated by war.
“I Should Be Fine, But I’m Not”
There had been optimism that economic growth would accelerate this year; that clouds of uncertainty would dissipate, boosting hiring and consumer confidence; that tax refunds would provide a buffer; and that inflation would recede further, paving the way for interest rate cuts.
However, the unpopular war in the Middle East and its consequent disruption of oil supplies, a surge in gasoline prices, and escalating risks of inflationary contagion have surfaced, souring sentiments already battered by cost-of-living concerns.
This month, a closely watched measure of consumer sentiment plunged to a historic low. Americans feel worse about the economy now than they did during the Vietnam War, the 1970s oil crisis, 9/11, the Great Recession, the Covid-19 pandemic, and the subsequent inflation surge.
Yet, overall, the data from the beginning of the year paints a picture of a resilient economy. And judging by the stock market (which, incidentally, is not the economy), this period looks like a golden age.
Concurrently, bankruptcy filings have climbed over the past three years; debt levels have risen; delinquency rates have increased; and personal savings rates are at their lowest in over three years.
“I should be comfortable as a middle-class person,” said Massey, who resides in a relatively affordable Nashville suburb. “I should be fine, but I’m not. I can’t be the only one feeling this way.”
It’s normal for prices to rise, especially over time. But since 2021, everyday goods and services have increased by roughly 25%. This is more than double the pace seen in the pre-pandemic period.
Lower-income families are bearing a disproportionate burden, as a larger portion of their income is allocated to essential needs like groceries and gasoline.
And as higher-income shoppers downgrade from premium brands to more budget-friendly alternatives, demand for cheaper goods is on the rise, noted David Ortega, a professor of agricultural economics at Michigan State University.
“If you were buying a generic product, you don’t have anywhere to go,” Ortega said.
The ‘K’ is Becoming Increasingly Lopsided
The sharp increase in gasoline prices has not curtailed consumer spending for everyone.
Data from Bank of America indicated that consumer spending in April was up 4% year-over-year, even without accounting for gasoline.
“This is the fastest growth in over three years,” David Michael Tinsley, a senior economist at the Bank of America Institute, told CNN, attributing it partly to higher tax refunds and the economy’s K-shaped recovery.
Income and wealth inequality has persisted for a long time in the United States and elsewhere; however, the disparities have intensified in recent years, he noted.
“The gap between wage growth for higher earners, for example, and wage growth for middle and lower earners is the widest in our data, which spans about 10 years,” he said.
Post-tax wage growth for high-income households (over $130,000) is 6% annually, compared to 1.5% for low-income households (under $70,000) and 2.3% for middle-income households ($70,000-$130,000).
The spending growth gap is less noticeable but still the most significant in three years, he remarked.
But tax refunds, which have served as a lifeline for some, are also limited, he added.
“I’m Stuck”
Bill Brantner has been in manufacturing for 20 years, including several instances where his workday ended with a note on a locked entrance. He never started a job for more than $19 an hour, never earned more than $23 an hour.
Many companies in his industry have been on standby for much of the last 18 months. High uncertainty has suppressed hiring, postponed raises, and slowed the critical churn needed for a healthy labor market.
President Donald Trump’s aggressive new tariffs have increased the cost of many materials and components. High fuel prices threaten to drive up expenses further.
Brantner, 51, says he works as much as possible — putting in 10-hour shifts, working six days a week, jumping on any overtime opportunities — just to make ends meet.
Brantner recently entered a debt management agreement and “zeroed out” his credit card bills, which had ballooned last year after he tried to save his cat Loki, who was battling cancer.
The debt management agreement, which entails a monthly payment, has freed him from the suffocating grip of high interest rates, but it requires him to abstain from taking on new credit.
There are no discretionary expenses — no movies, no restaurants, no joyrides, no new clothes or shoes; his coffee is whatever is in the breakroom; his bumper is held on with Gorilla Tape.
“If I sign another lease, and they raise my rent again, I won’t be able to; if they raise my insurance rates again, I won’t be able to,” Brantner said. “They’ve squeezed every drop of blood they possibly can out of this stone.”
Next May, if his rent is raised for the fifth consecutive year, he might have to live in his car on the outskirts of Colorado Springs, where sleeping in a vehicle is not prohibited.
“I’ve found a couple of places where I could pay $400 less per month, but to move into an apartment, you have to pay three times the monthly rent: You have to pay the first month, the last month, the security deposit, and all the other fees they tack on,” he said.
“I’m trapped. I can’t get out of this apartment.”
Ending Up With Almost No Lifeline
Lower- and middle-income households are experiencing economic pain first and most acutely, Elizabeth Renter, a senior economist at NerdWallet, told CNN in an email.
“As many of the prices impacted by the war are for necessary goods, they have few choices but to find ways to cover these expenses,” she said. “They are less likely to have cash on hand for unexpected expenses, and they see how precarious their situation is.”
Sian Slater, 59, works multiple jobs in the sprawling Phoenix metropolitan area, where driving is her sole means of getting to her day job at a major retailer or her overnight shift at a shipping company.
The surge in gasoline prices has already eaten into her budget. A gallon of premium unleaded, which her car requires, now costs about $5.50. Before the U.S.-Iran war, the price was below $4, she said.
The commercial cleaning business she started has lost a couple of clients who had to cut back expenses. She has done the same: halted automatic retirement contributions, canceled doctor’s appointments, and cut back on shopping.
“At the end of the week, with the added fuel costs, I have about $15 a week for groceries and medicine,” she said. “I’ve had to cancel upcoming medical appointments because I can’t afford the co-pays.”
She is developing a plan to gain more clients for her cleaning business and more hours at her retail job.
“But right now, I feel very poor,” she said, “and I’ve never felt that way before.”
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