By conventional measures of consumer purchasing power, affordability should not pose a major problem for U.S. households. Real average hourly earnings and real disposable personal income have both posted positive year over year growth since at least mid-2023, indicating that income gains have outpaced inflation. In addition, real average household net worth has risen across the wealth distribution since the pandemic, supported by substantial government stimulus in 2020 to 2021, higher home values, and a prolonged bull market in equities. These gains have been especially pronounced among households in the lower half of the wealth distribution, even though the pace of growth has slowed more recently.
Despite these favorable fundamentals, affordability has become a prominent concern for consumers, weighing on sentiment and raising fears about future spending and economic growth. This disconnect stems largely from the rising cost of essential goods and services, particularly housing, food, and electricity, which has matched or exceeded wage growth since the pandemic. Housing pressures are especially acute.
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