American Households Report Incomes Failing to Keep Pace with Rising Costs

For months, Americans have voiced their frustration over persistently high prices. Now, economists are detecting a more troubling development in the nation’s economic landscape.

Consumers are increasingly reporting that their incomes are not keeping pace with the financial pressures they face, marking a significant shift in the nature of the affordability crisis confronting American families.

Joanne Hsu, director and chief economist of the University of Michigan’s Surveys of Consumers, has observed this change manifesting in recent economic readings. She notes that while consumers have expressed frustration over high prices consistently for the past several years, this period is distinguished by something different.

“What makes this season different is that consumers are also increasingly mentioning weakening incomes as well,” Hsu explained. “This year, they are reporting pressures on their pocketbooks from multiple sources.”

The data supports these consumer concerns. According to the Bank of America Institute, inflation has risen faster than middle and lower-income households’ after-tax wages since January 2025. The result is stark. Nearly one in four American households is now living paycheck to paycheck, a figure that has grown during the past year.

This erosion of purchasing power is pushing more Americans to the edge of their budgets, making it increasingly difficult not merely to get ahead, but simply to keep up with basic expenses.

The mounting economic strain presents a significant political challenge for President Donald Trump, who returned to the White House with promises of greater affordability for American families. He now confronts growing voter doubts about whether he can deliver on those commitments.

A recent national survey shows that 76 percent of voters now rate the economy negatively, a sharp increase from 67 percent in July and 70 percent at the conclusion of former President Joe Biden’s term. President Trump’s economic approval has slipped to a new low, and his overall job approval has reached record levels of disapproval, even among voters who have historically supported him.

The convergence of stagnant wage growth and persistent inflation creates what economists call a squeeze on household finances. When prices rise faster than incomes, families must make difficult choices about which expenses to cut and which necessities to prioritize.

As the Trump administration works to address these economic challenges, the question remains whether policy interventions can reverse these trends quickly enough to restore consumer confidence and provide meaningful relief to struggling households. The coming months will serve as a crucial test of whether the administration’s economic agenda can translate into tangible improvements in Americans’ daily financial lives.

For now, the numbers tell a sobering story of American families caught between rising costs and wages that simply are not keeping pace.