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By Hugh Cameron
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More Americans say they are struggling to make ends meet, as affordability becomes an increasingly central concern across the U.S. in the run-up to holiday season.
According to a recent survey by payroll processing firm ADP, 64 percent of American workers polled report living paycheck to paycheck, up from the 46 percent who said the same in a 2023 study conducted alongside Visa.
A separate study from Bank of America, released last week, estimated that the share of lower-income households living paycheck to paycheck—defined as their necessity spending exceeding 95 percent of household income—had inched up to 29 percent from 28.6 percent in 2024 and 27 percent in 2023.
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Why It Matters
Amid the rising costs of homeownership, childcare and utilities, and with resurgent inflation sparing few goods, more and more Americans report facing significant financial strains in 2025. With a monthslong slowdown in hiring and layoffs beginning to grip the economy, many are expressing fears over their personal situation and pessimism about the economy as a whole.
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What To Know
Bank of America Institute economist Joe Wadford pointed to inflation as fueling the trend in 2025, telling CBS News that cost increases were putting "renewed pressure" on lower-income households in particular. In the report, the research team also cited a relative slowdown in lower-end wage gains compared to the higher-income groups.
In a recent blog-post, Apollo chief economist Torsten Sløk highlighted data from the Atlanta Federal Reserve showing that wage growth had slowed sharply for those in the lowest-earning quartile compared to the higher-income categories this year—evidence, he said, of an increasingly "K-shaped" U.S. economy.
The term has been employed frequently in recent weeks to capture the divergent successes of poorer and wealthier Americans, as data underscores the struggles facing the country's less affluent, while the higher-income continue to benefit from stock market gains and asset appreciation.
"We see strong investment and consumption growth driven by the stock market, driven by AI investment and all that," Brown economics professor Şebnem Kalemli-Özcan recently told Newsweek. "But at the same time, we see labor market weakening. We see poor households living month to month on their paychecks."
This issue has raised concerns that consumer spending—which accounts for a significant portion of U.S. economic activity—could be hit as increasingly cost-conscious shoppers cut back on purchases, especially going into the holiday season, a make-or-break period for retailers of all stripes.
"Low-income consumers are heading into the holidays under real financial strain," Melissa Bridgeford, consumer behavior expert and CEO of the AI-driven commerce platform Wizard, told Newsweek. "Inflation has continued to hit everyday essentials, and even toy prices are up.
"After this year’s tariffs, families already stretched by the higher cost of living will now have to spend more for the same gifts."
However, she added that higher-income shoppers are "expected to spend steadily through the holiday season." Given the top 10 percent of earners account for over half of total spending, Bridgeford said this group will likely be able to keep the holiday market afloat in 2025.
What People Are Saying
Bank of America Institute economist Joe Wadford told CBS News: "Inflation is picking back up again, and cost increases are picking back up again. That's definitely going to put some renewed pressure on those households.
"The gap between their wages and expenses has just continued to widen since the beginning of the year," he added. "When the cost of living is increasing 3 percent but your wages are only increasing 1 percent, you're just going to really struggle to keep up."
Melissa Bridgeford told Newsweek: "Higher-income consumers are expected to spend steadily through the holiday season. The top 10 percent of earners now drive roughly half of total U.S. consumer spending, and luxury spending has remained resilient despite tariffs and higher prices. So the holiday market may look stable overall, but the strength will likely come from affluent shoppers, not from the average household, where budgets are under pressure."
What Happens Next
President Donald Trump, facing mounting pressure to address current affordability challenges, has recently announced a series of measures aimed at lowering consumer prices and providing Americans with financial relief.
This includes rolling back his tariffs on staple products like beef and coffee, while proposing a $2,000 tariff "dividend" and the introduction of 50-year mortgages.
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