The economic well-being of average Americans

Last month, the Federal Reserve released a new report: Economic Well-Being of U.S. Households in 2021 [PDF]. This annual survey gauges American financial health and attitudes. The 2021 edition was conducted last November.

Here are some highlights from the report:

  • Seventy-eight percent of adults were either doing okay or living comfortably financially, the highest share with this level of financial well-being since the survey began in 2013.
  • Fifteen percent of adults with income less than $50,000 struggled to pay their bills because of varying monthly income.
  • Fifteen percent of workers said they were in a different job than twelve months earlier. Just over six in ten people who changed jobs said their new job was better overall, compared with one in ten who said that it was worse.
  • Sixty-eight percent of adults said they would cover a $400 emergency expense exclusively using cash or its equivalent, up from 50 percent who would pay this way when the survey began in 2013. (Note that this survey is the original source of this oft-quoted statistic.)
  • Six percent of adults did not have a bank account. Eleven percent of adults with a bank account paid an overdraft fee in the previous twelve months.

These little nuggets of info are interesting, sure, but what I find even more interesting are the charts and graphs documenting long-term trends.

The Demographics of Economic Well-Being

Here, for instance, is a chart that shows how people feel about their current financial situation:

Current economic well-being

In 2021, 78% of adults in this country reported “doing okay” or “living comfortably”. That’s up significantly from when this survey started in 2013.

The next logical question, of course, is how different demographics feel about their financial situation. The Fed report offers some insight into that.

Here’s a chart that shows (once again) the value of a college degree).

Economic well-being by education level

Although it’s popular in some corners to bad-mouth college degrees, according to the U.S. Census Bureau (and many other sources) your education has a greater impact on lifetime earning potential than any other demographic factor. Education matters more than age. Education matters more than race. Education matters more than gender. When it comes to making money, education matters most.

Next, here’s a chart from the Fed report that documents economic well-being by race and ethnicity:

Economic well-being by ethnicity

It seems that economic well-being has improved across the board during the past decade.

Personal Well-Being Versus National Well-Being

To me, however, the most interesting chart is this one, which compares respondents’ assessments of their personal well-being with their assessment of local and national economies. Look at this chart and tell me what you make of it. (I have an opinion, but I want you to develop your own hypothesis before reading mine…)

Personal vs. national economy

From the report:

Similar to people’s perceptions of their local economy, the share rating the national economy favorably fell precipitously from 2019 to 2020, after the onset of the pandemic ). However, people’s perceptions of the national economy continued to decline in 2021. Only 24 percent of adults rated the national economy as ‘good’ or ‘excellent’ in 2021, down 2 percentage points from 2020 and about half the rate seen in 2019. This trend contrasts starkly with people’s increasingly favorable assessment of their own financial well-being.

The Fed report tells us this discrepancy exists but it doesn’t tell us why it exists. Why do 78% of Americans say that their own financial situation is at least okay, but nearly the same number believe that the national economy isn’t doing well? I don’t know. But I can think of two possible reasons.

First, perhaps most Americans have learned to manage money. Perhaps they’ve been reading money blogs and listening to money podcasts, and now the lessons have sunk in. Maybe they’ve begun saving and investing wisely over the past fifteen years so that their personal economy is now protected from the gyrations of the economy at large.


I harbor a suspicion, however, that there’s something else at play here.

Long-time readers know how much I abhor the news media. The mass media does not report reality. If you envision life as a bell curve (or “normal distribution”, if you prefer), the mass media tends to report solely outlier events — especially negative outlier events. The vast majority of our lives comprise normal, positive, healthy interactions and relationships and conditions. The news doesn’t report these.

In this case, I can’t help but wonder whether this disparity between perceptions of personal economic well-being and national economic well-being are driven (at least in part) by negative economic news, news that highlights the problems with our economy rather than the things that are going right.

That’s what I think. What do you think? What’s the reason for this gap in perception?

Final Thoughts

There’s much more data and insight in this 92-page report. I’ve highlighted only some stats from the first section on overall financial well-being. Other sections cover income, employment, unexpected expenses, banking and credit, housing, education, student loans, retirement and investments, and more.

I found the section on student loans interesting too. It contains a number of insights. Borrowers with less education, for example, are more likely to be behind on loan payments. This makes some sense, I think. Meanwhile, fewer people are behind on payments than two years ago (and this applies across all demographics).

Here, though, is my favorite chart from the entire report. It measures the self-assessed value of higher education:

Value of college education

Two things seem clear here. First, folks who never had to borrow for college believe their education is worth more. Second, the more education one obtains, the more valuable it seems.

Okay, a third thing. Compare this chart with the one I shared earlier that highlights financial well-being by level of education. It’s clear that (objectively) education does improve financial health. But those who have student loans can’t always see that. Their subjective experience seems to contradict the data. Interesting…

Anyhow, the Fed’s Economic Well-Being of U.S. Households in 2021 is filled with interesting info. It’s worth reading (or skimming) the next time you sit down to waste time on the internet!

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There are 14 comments to "The economic well-being of average Americans".

  1. Dave @ Accidental FIRE says 02 June 2022 at 11:13

    So pretty much everyone has been doing better financially over time and that flies directly in the face of the general “things are getting worse” narrative. I’m not surprised. I 100% agree with your second reason – it’s the delta between what the media chooses to “report” (ie what will get the most clicks, scare folks the most, and give us a reason to post a picture of an attractive model), versus what’s really happening. It echoes Steven Pinker’s work where he proves with real hard data that the world is a better place and keeps getting better by virtually every conceivable measure – poverty, war, famine, curing diseases, the spread of democracies, the fall of autocracies etc etc. Yet if you spend 30 seconds on Twitter or social media you’d think everything sucks and keeps getting worse.
    Great post JD, thanks for highlighting that report!

  2. Anne says 03 June 2022 at 07:14

    I certainly believe in the value of an education for many, many reasons, but came across an argument against statistics showing how much more you make in a lifetime with a degree. In some ways apples and oranges are being compared.
    If one lumps together ALL adults WITHOUT degrees who are earning, you also have included recent immigrants with language difficulties, people struggling with mental and emotional handicaps, people who came from home situations where just finishing high school was a miracle, substance abusers, etc. In other words, not just people who made a concious decision NOT to pursue a standard four year degree.
    It tips the scales disproportionately. Now, I have no idea how you could separate out people with a like mindset and like opportunities to compare life wages. I don’t imagine it can be done. But lumping college degree earners vs. everyone else is pretty off kilter.

    • J.D. says 03 June 2022 at 08:00

      Hey, Anne. Whenever I encounter the education data, the sources seem to make an effort to take this sort of thing into account. The folks who design the surveys and studies are aware of these issues and account for them. They don’t just lump all non-college folks together. That said, if you can find a link to the story you saw re: education statistics, I would love to read it!

  3. Watcher says 03 June 2022 at 07:44

    I think we can’t trust information coming from either the mainstream media or the federal government. Both are controlled by the powerful elite, and both have much to gain by telling us “Everything’s OK”.
    That said, are things improving globally over time? Yes. Are they improving enough to warrant keeping current institutions in place? Not even close. That’s my opinion, at least, as an open-minded watcher and student of history.

  4. Jeff says 03 June 2022 at 10:37

    Great post! There are lot of federal government reports that are really useful.

    It bears acknowledging that the relative success of college graduates only partly measures the contribution of college itself.

    Even if you’re from a well-off background, it takes perseverance to stick with college all the way to completion of a 4 year degree.

    It’s kind of a trial run for how you’ll handle the rest of your life.

    I would like to think that the training one receives in college is what makes the difference, but a 4 year degree is in some ways more “signalling” of yourself than anything else.

    • Anne says 03 June 2022 at 14:29

      Well, yes and no about perseverance to finish a college degree. It takes a lot more perseverance to get through if you are completely supporting yourself, struggling financially, maybe even supporting a family at the same time. Time, money and energy are in short supply.

      But there are some riding the college train, completely supported by mommy and daddy, because it puts off growing up for four more years. Many saw college (myself included) as a whole lot more pleasant than the working world.

  5. Luke says 07 June 2022 at 07:08

    While I agree “the media” is largely focused on the doom-and-gloom, I think from a debt-to-income ratio perspective, US households are objectively doing better than the federal government (running massive deficits, expanding national debt), particularly after households deleveraged a little following the financial crisis of ’08. And its easy to reconcile the two – think of all the fiscal and monetary policies enacted to spur consumption as a response to the pandemic (generous unemployment, child tax credit pre-payments, etc.)… everyone feeling flush lately has little to do with enhanced productivity and much to do with government subsidies.
    (as a side note: I’m all for helping one another when we’re down in the dirt, but when the good times are rolling, we have to learn to scale back programs to sustainable levels… unfortunately, the political system today is not built to solve for long-term problems and the Fed seemed unwilling to raise rates while the US economy was slowly improving over the last decade).
    I would be interested to see how people are feeling now compared to last November, since inflation has started to hit everyone’s pockets over the last few months (a result of some of the overheating caused by aforementioned policies).

  6. RichardP says 07 June 2022 at 10:58

    I agree completely with your assessment that the media causes that skew in perception of the local and national economy. I saw a great infographic from that really made this clear. Your odds of dying in a terrorist attack are less than .01% but about a THIRD of death-related media coverage was about terrorists. Conversely, your odds of dying from heart disease are about 30% but media coverage was about 2.5%.

  7. Megan says 08 June 2022 at 13:58

    In early 2021, the New York Times recognized the media (including themselves) tend to have a “bad news bias” based on a study by Bruce Sacerdote out of Dartmouth College and a few other researchers. The study also found that consumers of mass media also tend to read and share more negative stories. Also, we as humans are hardwired to pay attention to the negative. It’s related to our evolution, as negative implies danger and we are programed to survive.

    • J.D. says 08 June 2022 at 14:11

      Nice, Megan. Thank you. If I gave “gold stars” to commenters, I would give you a gold star. 🙂

  8. Corwin @ Engineering Your FI says 11 June 2022 at 12:37

    Hi J.D.,

    Great summary of the Fed report. I particularly like the education results – despite the wild exclamations from many online personas that nobody needs a degree anymore and everyone can learn anything online, it’s nice to see in black and white how formal education still produces higher quality of life on average. It also makes me feel better after spending 10 years in college, ha.

    I also enjoyed your Theory #1, even though it’s just a delicious fantasy. It does make me wonder though if anyone has done a survey of what percentage of Americans (or other nationalities) HAVE read financial blogs/podcasts/videos/etc and what percentage have actually taken positive action with the finances as a result. If you’re aware of anything like that, I’ve love to see it (a quick google search revealed nothing).

  9. GerryL says 19 June 2022 at 12:35

    I agree with your take about media noise causing people to evaluate the overall economy as being worse than their personal situation. Constant news coverage also leads people to believe that crime rates are higher than in the past.

  10. Mariele says 24 June 2022 at 08:27

    I feel like the most obvious answer is COVID-19.
    People didn’t have to pay on their student loans, everything shut down, people learned to be a bit more self-sufficient and couldn’t spend on trips and the like… basically, at a time when everyone felt like the government was hemorrhaging money and our local cities were barely scraping by due to nobody being able to go out and buy anything, we all learned restraint and had an opportunity to sock away extra money.
    I know our family got ourselves straightened out financially because of this. When we have to start making payments again, we’re going to be in a better situation than we were before COVID-19, because we were able to channel those minimum payments into paying off other debts. Additionally, we learned better spending practices after having stores closed during our shopping hours for months. At the same time, when we have such high inflation and so much national debt, and so many local businesses died off, it’s hard not to think that the local and national finances aren’t looking so hot.

  11. Abnormal Money says 24 July 2022 at 16:28

    I agree the amount of debt plays a large role in how beneficial you perceive your education to be. I believe most people think of cash flow when answering that question, and even if you get a great degree and get a high-paying job, you won’t feel better off if 1/4 of your net income goes towards paying down debt.

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