The Wall Street Journal: America’s middle class is collapsing

After nearly five years of successive price hikes, America’s middle class seems to be living between two parallel pressures, ever-rising daily costs and a general sense that life is harder than it was a year and a half ago.

The WSJ asserts that the prices of goods and services are 25% higher than in 2020, and that the living standards to which millions of households are used are now threatened.

Although the inflation rate has fallen from its peak in 2022, the prices of coffee, ground beef and car repairs have risen significantly this year, deepening the sense of financial exhaustion.

The Wall Street Journal is based on the Pew Research Center’s definition, which puts the middle class in an income range of $66,000 to $200,000 a year, depending on where you live.

Despite its widespread, all those who enter it feel what the newspaper calls an ongoing price shock, a shock that has prompted many to aggressively seek cuts, restrict spending, and reprioritize.

The newspaper cites the results of the University of Michigan’s Consumer Confidence Survey, which showed that 44% of middle-class respondents said their financial situation is worse today than it was last year, compared to only 23% who said it has become better, with most pessimists directly attributing this to higher prices.

The newspaper cites data from recent earnings reports of major US companies, revealing that the middle class has become a pressure on retail sales: Fast-food chain Wing Stop said middle-income customers are now starting to cut back on their purchases, as have lower-income earners.

Target has announced a significant decline in spending on non-essential goods such as clothing and home décor.

Walmart, on the other hand, recorded strong sales as consumers from all income levels poured in in search of the right prices.

This change in consumer behavior, the Wall Street Journal confirms, has become a clear feature of the US economy this year.

The newspaper reviews a series of personal testimonies that express the depth of the crisis, as the mother of a full-time child who is raising her own child says: “I need to know where the light is at the end of the tunnel”.

The mother explains that after buying a house, she had to face a rise in mortgage due to 6.5% interest, in addition to an increase in real estate tax by about $1,000 and an increase in the insurance premium by $600.

To cut expenses, it eliminated dental insurance, reduced home insurance coverage, and turned to a side hustle managing a rental property.

Other families in Connecticut had to keep the lights off most of the time to save electricity.

The middle class has been in a strong position during the pandemic years, with government support checks flowing in, and savings soaring by more than $500 billion between 2020 and the beginning of 2022.

But by 2025, most of these savings have been completely wiped out, as households have used them to keep up with rising prices for food, rents and services.

Even wage increases haven’t worked because they have been swallowed up by successive waves of inflation.

The cost-of-living crisis prompted voters in the last November election to choose candidates who promised to address the affordability crisis, at a time when the same factors have hurt Joe Biden’s 2024 campaign and are now putting pressure on President Trump’s satisfaction rates.

Harvard professor Stephanie Stancheva is quoted as saying: “People feel that their standard of living is declining”.

The Wall Street Journal’s data and reports show that the main problem is not just rising prices, but the length of inflation, which has accumulated to the point of exhausting once the most stable households in America.

Today, according to the WSJ’s analysis, the middle class is looking for fresh economic air, while its being billed, its purchasing power is shrinking, and there are no clear signs of an imminent breakthrough.