Two-Thirds Of Americans Say High Cost Of Living, Gas Prices Are Biggest Financial Risks

If one listens to the NFIB small business survey, or for that matter any of the other periodic confidence surveys over the past year virtually all of which are at or near record highs, life in the US has never been better.

And indeed, with the Fed's Flow of Funds report calculating that US household net worth has never been higher, just surpassing $100 trillion for the first time ever, perhaps the US has finally stumbled into a state of utopia...

... even if as the chart below shows, the rising value in mostly financial assets benefits only 10% of the US population, as more than half of Americans have zero assets to their name.

So maybe America is truly living through a golden age. Then again, maybe not, because as the latest consumer attitudes survey from Bank of America shows, while consumer sentiment was little changed, if elevated, in May, most respondents continue to report high costs of living and tepid wage growth as the main concerns to their financial situations.

As the bank reports, "the usual concerns around high cost of living (71%) and oil/gas price (60%) topped the list while risks around tightening credit conditions and deterioration of the labor market seemed limited."

As one would expect, the top concern varied by age group, with younger respondents (those in their 20s) reported difficulty in finding jobs to be the second biggest risk as respondents in this group are more likely to be students looking for employment opportunities. Meanwhile, for the older cohort (60 and up), financial security is the biggest concern as stock market crash ranks high on the list. This is to be expected as they are closer to or at retirement age and more risk averse about their investments.

That said, in validation of the recent surge in confidence, 42% of respondents reported that the economy is in a better place today than it was a year ago compared to 31% who reported that it had worsened.

In a survey of consumers' views of the labor market showed that conditions remain in favor of the worker, with the majority of respondents reported that conditions are about the same or easier to find a job compared to a year ago.

An interesting divergence emerged in the survey of how likely it is for Americans to lose their jobs. According to BofA, consumers on balance thought it was less likely to lose a job today compared to a year ago. Overall, 32% of respondents said it is less likely to lose a job now compared to a year ago while 30% thought it is more likely.

However, the optimism was not uniform, as breaking down the answers by income group, people are relatively optimistic except for those with an annual income less than $50k. For the bottom income group (<$50k), 35% of people think it is more likely to lose jobs now than a year ago while only 26% said it is less likely. This is in stark contrast with the top income group (>$125k) where just 24% said it is more likely to lose jobs now and 41% reported that it is less likely. In other words, those making low incomes have to worry not only about making ends meet but also losing their job to Johnny 5.

Finally, in a special batch of questions looking at the impact of the gig/sharing economy, BofA finds that it's not quite as popular as many try to make it, with a large majority (71%) reporting that they do not work or have an income stream from the sharing/gig economy while only 7% of respondents reported it as their only source of income. This is consistent with research which finds that roughly 10% of workers were employed in "alternative work arrangements."  Moreover, the Economic Policy Institute which finds that the gig economy consist of 0.21% of total employment and just 0.1% of total full-time, full year equivalent employment.

Drilling down, the "gig economy" seems most popular with workers on the fringes of the labor market (e.g. students, unemployed, part time workers) as they were more likely to report having income from the gig economy than full time and retired workers. These results suggest that the gig/sharing economy, while beneficial to some, has yet to meaningfully alter the fundamental structure of the labor market, something which the BLS's recent Labor Force Characteristic survey confirmed as well.

As BofA summarizes current economic conditions, as seen through the prism of its consumer survey, "consumer feels good about the economy and the labor market" even as "high cost of living and tepid wage growth remain key concerns for households but not enough to hold back consumer activity which accelerated."

BofA's conclusion: "For the consumer, right now, it's matter over mind", which means that as long as the economy (and market) continue to plow along, and are not spooked by the Fed's tightening, US consumers will prefer to keep the status quo, something which is critical for Trump and the republicans as the miderms approach. The question is whether this state of near economic bliss can sustain for the next 4 months.


JimmyJones Never One Roach Wed, 06/13/2018 - 14:28 Permalink

got kids?  If they are too young for school add about 1100 per kid to that bill per month.  So if you got 2 thats about 26000, good luck paying for that. Make sure you give a dirty look at the Welfare queens that don't work and also get child care subsidized for them so they don't even have to raise the kids they had that they couldn't afford while just "chilling" watching da TV.

In reply to by Never One Roach

swmnguy JimmyJones Wed, 06/13/2018 - 16:04 Permalink

That's why when my wife and I had kids, she stayed home and only worked weekends.  She was making about $2,200/month working full-time.  Why spend every penny of that on daycare?  So we had no daycare, she worked on weekends, and only made about $1,000 a month, but we got to keep it.

And anybody who envies people on welfare has never dealt with welfare or the people on it.  There's no such thing as "free" anything.  There is one helluva cost to being on welfare.

In reply to by JimmyJones

Endgame Napoleon Rapunzal Wed, 06/13/2018 - 14:24 Permalink

The welfare-eligible, part-time workers supplement their inadequate wages that keep them under the income limits for welfare with welfare. 

The welfare-ineligible, part-time workers supplement their earned-only income that is soaked up by half by rent with gigs. 

Both gigs and jobs, part time or otherwise, are expensive, and when the pay is low, you sometimes must do a cost / benefit analysis, weighing which low-wage job or gig costs the most.

Since gas prices have gone up, this is one more job expense to consider when deciding whether or not that $20 is really pure profit. When gas & other expenses are subtracted from it, what you get to spend would not make Andrew Jackson happy, even before they removed his face from the $20-dollar bill.

If it’s a gig, do not forget to subtract 15.3% in SS tax, but hey, take heart that the welfare-pumped-up employees—with their up to $6,431 in child tax credits, even though they pay no income tax—only pay 7.65% SS tax into the fund. 

I can see the point about the priorities of those near retirement, but even middle-aged & older workers who lack retirement income have to care about the financial markets due to the solvency of the SS fund. It is a separate program, but in a real meltdown, that does not mean that it is safe. And we have to pay into it, some way more than others. 

In reply to by Rapunzal

cougar_w Wed, 06/13/2018 - 13:46 Permalink

These broad-brush surveys are likely completely invalid due to the methodology. They assume a normal distribution of responses to questions when in reality we now have a bi-modal distribution that reflects our bi-modal social and economic structure. Of course, statisticians won't change their methods because then they won't be able to compare the recent apples to prior oranges, and not being able to state trends is not going to work for them.

lnardozi Wed, 06/13/2018 - 13:47 Permalink

"We ain't got no money" if only we could make policy makers understand this sentiment from the vast majority of the population every business could be made far more profitable.

Explaining to a business owner that if they all paid their employees more they would all see a lot more business is like asking them to play Prisoner's Dilemma and ignore their trust issues.

Still, no one's  going to buy a steak dinner unless they have money. Credit cards have been maxed out to the point that even a hamburger is too much to afford.

Umh Wed, 06/13/2018 - 13:49 Permalink

Excess immigrants (illegal, refugee ...) during a economic down turn seem like an unneccessary risk even if a few would self deport.

Chief Joesph Wed, 06/13/2018 - 13:52 Permalink

"Two-Thirds Of Americans Say High Cost Of Living, Gas Prices Are Biggest Financial Risks".  But, but, but, that is very capitalistic.   Isn't Capitalism just Great?  Bye the way,it was Karl Marx who first invented the term"Capitalism", that you so proudly wear on your chest.

thebigunit Wed, 06/13/2018 - 14:03 Permalink

Hmmmm.  Does Gavin Newsom know this?

California progressives just assume that there will be a mammoth "blue wave" in November and that Newsom is a lock for governor.

But, Newsom is a big fan of tax hikes, INCLUDING the hike in gas taxes.

Memo to Gavin:  call President Hillary and see if she sees any chance that anything could wrong.

swmnguy Wed, 06/13/2018 - 14:17 Permalink

Maybe most people spend a lot more on gasoline than I do.  But then, I know a lot of people who have convinced themselves they should live far away from where they work and do stuff.  It's not just the gasoline they squander; they think it's just fine to spend 3 or more hours a day riding around in a car, between going to and from work, running errands, picking up kids, etc.  

If you put any value on your time that doesn't make any sense.  But who ever said Americans made a lot of sense.

swmnguy Chauncey Gardener Wed, 06/13/2018 - 16:10 Permalink

Then why do they work someplace they can't afford to live?  True, I couldn't afford to live in San Francisco, Manhattan, Seattle, or the Silicon Valley.  So I don't work there, either.

If you want to call Minneapolis "utopia," feel free.  It's a place where the median wage is well above the national median, and there are no areas within a half-hour of a median-wage job where you can't find a place to live you can afford.

There are plenty of other places in the US that fit that description.

And we're not slaves, are we?  We do have choice.  My choice was to find jobs and housing near one another, which paid and cost what I could afford, and to adjust my style of living so I could live beneath my means.  I'm not a unique genius, stable though I am indeed.

Life's hard enough, but it's even harder for people who don't make appropriate and suitable life choices.

In reply to by Chauncey Gardener

Aubiekong Wed, 06/13/2018 - 15:19 Permalink

If the wife and I had health Insurance (obamacare all thanks to democrats) it would be my biggest bill by far, almost three times my house payment.  Instead I chose to save the money each month and spend it on vacations.  If we get sick then we will pay out of pocket until we can jump on Obamacare.  And no I haven't and I will not ever pay a penalty/fine/tax for not having health insurance. 

Batman11 Wed, 06/13/2018 - 16:17 Permalink

Think like an international investor.

Would you invest in the US?

Maximising profit requires minimising labour costs, i.e. wages.

Disposable income = wages – (taxes + the cost of living)

The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

Who would invest in the US?

What a dump.

China, Asia and Mexico look good.

Expat Wed, 06/13/2018 - 17:08 Permalink

Gas prices are cheap.  Americans are fucking morons or so pathetic that $3-$4 gas matters to them.  Sounds like a 3rd world economy that needs subsidies at the pump...isn't that what the Moron in Chief is saying when he whines like a little bitch to OPEC?

Try looking at real gasoline prices vs inflation.