US Stocks plummeted in their worst day since June 11, 2020 after key August inflation data ticked upward, surprising investors.
The market is worried that hotter-than-expected inflation will prompt the Federal Reserve to raise interest rates more aggressively, inflicting serious damage to the US economy in the process.
The Dow was down 1276 points, or 3.9%.
The S&P 500 fell 4.3%.
The Nasdaq Composite tumbled 5.2%.
As the cost of living rises, some American households are stretched too thin.
Now, roughly 1 in 5 workers cannot make it from paycheck to paycheck, according to a report.
From gas to groceries, soaring prices are straining households across the board.
More than three-quarters of working Americans said inflation has impacted their finances over the past year, according to a report by Salary Finance.
While wage growth is high by historical standards, it isn’t keeping up with the increased cost of living, which is rising at the fastest annual pace in about four decades.
When wages increase at a slower pace than inflation, paychecks won’t stretch as far.
Now, workers are running out of money faster, Salary Finance found.
Roughly 20% of employees regularly run out of money between paychecks, up from 15% last year, according to the survey of more than 3,000 working adults in February.
As a result, about one-quarter of those polled said it’s harder to afford necessary expenses and one-third are unable to build savings, issues that are particularly problematic for low-to-moderate income workers.
Low earners funnel a bigger share of their budgets to transportation costs and other staples, like food and energy, relative to wealthier households, data show.
Further, people with $50,000 or less in annual income already have thinner margins between the money they take home and what they spend, according to Kayla Bruun, economic analyst at Morning Consult.
While no one is immune to recent price spikes, smaller income households are feeling it most because they have less of a financial buffer, Bruun said.
Inflation jumped at its fastest pace in nearly 40 years last month, a 7% spike from a year earlier that is increasing household expenses, eating into wage gains and heaping pressure on President Joe Biden and the Federal Reserve to address what has become the biggest threat to the U.S. economy.
Prices have risen sharply for cars, gas, food and furniture as part of a rapid recovery from the pandemic recession that was fueled by vast infusions of government aid and emergency intervention by the Fed, which slashed interest rates. As Americans have ramped up spending, supply chains have been squeezed by shortages of workers and raw materials.
“Inflation ended 2021 very hot,” said Ben Ayers, senior economist at Nationwide. Ayers and other economists say prices may cool off some as snags in the supply chain ease, but inflation will remain elevated throughout 2022.
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