African-American consumers have been the hardest hit by the sharp rise in inflation which last month reached a 40-year high.
For African-Americans, the cost of living since the beginning of the pandemic has risen by almost 90 percent, according to a recent study conducted by HIT Strategies, a public opinion research company specializing in the concerns of minorities, millennials and the LGBTQ communities.
The anxiety among Black households regarding high prices and inflation may reflect that many of these families have not yet recovered from the effects of the pandemic.
The consumer price index, which measures the cost of a group of everyday items, surged 8.5 percent on the year in March, the U.S. Department of Labor said Tuesday.
The report showed the highest inflation since December 1981. While wages have picked up for many workers, they generally aren’t keeping up with inflation.
If price pressure continues, more than 50 percent of adults say they’ll cut back spending on dining out and will consider reducing that further, according to the CNBC + Acorns Invest in You survey, conducted by Momentive. The online survey of nearly 4,000 adults was conducted March 23-24.
People are reportedly also cutting back on driving and subscriptions and are even canceling vacations to keep up with inflation, the survey found.
While unemployment nationally is steadily ticking down, the ramifications of inflation have tempered this positive news among Black families.
Prior to the pandemic, African-Americans were reportedly 24 percent less likely to receive unemployment benefits after leaving a job than White individuals. A Brookings Institute report in January suggested that 80 percent of this gap stems from differences in take-up of benefits among those eligible for unemployment insurance, and not differences in eligibility.
Apparently, some 42 percent of eligible Black persons took unemployment benefits compared to 55 percent of eligible White persons. The most important explanation for the disparity, according to the authors, is that Black workers tend to have lower pre-unemployment earnings. Workers with higher pre-unemployment earnings are “more likely” to apply for larger unemployment benefits.
There was some good news in the March inflation data. Core inflation, which strips out the volatile prices of food and energy, didn’t rise as much as economists anticipated. This could mean that March will have been the peak of inflation, with prices finally starting to moderate going forward.
Inflation has pushed up the prices of most consumer goods and services, including housing, food and energy. That means many Americans are now spending more on essentials, making their budgets tighter without any change in habits. People are noticing these hikes and paying closer attention.
Nearly half of all adults responding to the Momentive survey said they think about rising prices all the time, while 55 percent of those with annual household incomes of $50,000 or less are constantly checking costs.
“Having your eyes focused on your spending is always a good strategy,” said Susan Greenhalgh, an accredited financial counselor who runs Mind Your Money in Hope, Rhode Island. “You really can’t understand what’s happening with your money unless you’re really looking at it and measuring it.”
Keeping track of what you spend can also help you tailor where you can cut back, she said, as inflation hits everyone differently. If you’re someone who doesn’t eat out much but is getting pummeled by gas prices at the pump, reducing driving will probably help your budget more than skipping a few dinners at a restaurant.
It’s also important to be watching and comparing your spending month to month because prices are rising so quickly. You may have to adjust more frequently than you’ve had to in the past.
“The No. 1 goal is, no matter what, to protect the necessities, and that is food, shelter, basic transportation and basic medical,” said Tania Brown, founder of FinanciallyConfidentMom.com.
Inflation may continue to run hot, squeezing budgets even further. The survey found that more than 75 percent of adults said they’re worried higher prices will force them to rethink their financial choices.
Brown added that the impact will be the harshest on those with the lowest incomes who may be pushed into survival mode. For those struggling to cut spending even more, she also said to reach out to creditors and lenders to see if you can put off payments.
“Some people may also qualify for programs to assist with utility bills, which could help with monthly costs,” Brown said. “It may also be time to dip into emergency savings to cover your essential costs, if you need to.”
Those with higher incomes will also have to adjust, especially if they want to keep saving at the same rate as they were before inflation ticked up, Greenhalgh said.
Brown and Greenhalgh stress that if your budget is stretched too thin, cutting back on savings may have to happen to avoid debt. If that is necessary, the two economists suggest putting away smaller amounts constantly to keep yourself in the habit of saving.