Us households are financially flush ahead of 2022, Fed survey shows

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Us households are financially flush ahead of 2022, Fed survey shows

Fed survey shows People shop at the Eastern Market in Washington in the U.S. households were financially flush going into 2022, according to the Fed survey.

The Federal Reserve report released on Monday showed that households in the U.S. reported their highest level of financial well-being since tracking began almost a decade ago.

The U.S. central bank's annual survey of household economics and decision making showed workers enjoying the benefits of working from home even though the recovery from the coronaviruses continued, with little fervor to return to office and general bullishness about the labor market.

The report provides valuable insight into the financial situation of Americans during the late fall of 2021, Fed Governor Michelle Bowman said in a statement.

The report, based on responses from 11,000 adults in October and November of 2021, shows that Americans have seen an improvement in their finances over the last two years due to a surge in COVID 19 cases due to the Omicron variant.

It is tied to a combination of pandemic-era direct cash payments and enhanced unemployment benefits that cushioned the economic blow of the pandemic on Americans in 2020 and part of 2021, rising asset prices and tight jobs market, which is fueling strong wage gains.

The child tax credit passed earlier in 2021 and the sharp rise in children attending in-person schools probably contributed, according to Fed officials.

Some 78% of adults said they were living comfortably or doing okay financially, up from 75% in 2020 and the highest level since the survey began in 2013.

Financial well-being increased among all racial and ethnic groups, with a notable jump among Hispanics.

The share of Americans who said they would be able to cover a hypothetical $400 emergency expense with cash, savings or a credit card paid off on the next statement rose to 68% from 64% in 2020.

The Fed officials said that the increase was related to longer-term improvements in financial well-being as well as factors including larger bank account balances and potential financial relief measures.

The Fed is trying to control inflation that is running at a 40 year high, and it recently shifted to a more aggressive monetary policy stance last year after two years in which it kept financial conditions deliberately loose to protect the economy from the worst of the Pandemic.

The central bank raised its overnight lending rate by 75 basis points in March because it wanted to dampen demand among U.S. consumers who still have spending power despite the war in Ukraine and periodic Pandemic-related lock-downs in China.

The Fed is watching the U.S. unemployment rate, which is currently at 3.6%, back to pre-pandemic levels.

The Financial Well-being report showed that 15% of workers said they had switched jobs in the past year, and most people said that the job change was an improvement, even though the unemployment rate was still higher late last year.

In the fall of last year, around 22% of employees worked from home, a decline from 29% in the previous year, and well above the 7% who worked completely from home before the Pandemic.

Most workers said they wanted to continue doing so, citing a better work-life balance, and that they would be about as likely to look for a new job if their employer implemented a pay freeze, the Fed report said.