More American households are struggling to afford basic necessities than they were during the height of the Covid-19 pandemic, according to new research from the Federal Reserve Bank of New York, a signal that rising living costs are placing increasing pressure on lower-income families.
The findings, based on a February 2026 survey of household finances, point to a sharp deterioration in food security and financial resilience. Researchers found growing numbers of families drawing down savings, relying on assistance programs, and reporting difficulty putting enough food on the table. The results arrive at a time when inflation remains elevated and many consumers have become increasingly pessimistic about their economic prospects.
One in Ten Households Reported Food Shortages
The New York Fed surveyed households on a range of financial challenges, including access to food, reliance on savings, and participation in government assistance programs.
Researchers described the increase in food insecurity as significant, particularly among lower-income households, people with lower levels of education, and families raising young children.
According to the survey, 10% of respondents said their households did not have enough food or that children had missed meals. That compares with 4% who reported similar hardship in June 2020, when much of the country was still dealing with the economic disruption caused by the pandemic.
The study also found that more than one-third of households had used savings to cover grocery expenses, up from 21.8% during the early months of the pandemic.
Federal Reserve researchers linked these pressures to persistent inflation, elevated borrowing costs, and rising debt burdens. Higher delinquency rates on credit cards, auto loans, and student loans suggest that many families are finding it increasingly difficult to absorb higher everyday expenses.
Inflation Pressures Are Hitting Households Unevenly
The survey’s findings add to evidence that economic gains are being distributed unevenly across income groups.
Inflation reached 3.8% in April, its highest level in nearly three years, increasing the cost of essentials such as food and housing. While higher-income workers have generally benefited from stronger wage growth and a resilient labour market, lower-income households face a greater share of spending on necessities, making them more vulnerable to price increases.
Economists often describe this pattern as a “K-shaped” recovery, where different segments of the population experience sharply different financial outcomes. The New York Fed’s research suggests that dynamic remains in place, with wealthier households maintaining spending power while financially constrained families face mounting affordability challenges.
The trend also reflects a broader shift in household balance sheets. During the pandemic, government stimulus payments, enhanced unemployment benefits, and expanded support programmes helped many families build cash reserves. Much of that cushion has now been depleted, leaving households more exposed to inflation and higher borrowing costs.
Consumer Confidence Falls as Safety Net Shrinks
The deterioration in household finances is occurring alongside a steep decline in consumer sentiment.
The University of Michigan’s consumer sentiment index fell to 44.8 in May, below levels recorded during both the pandemic and the Great Recession. The New York Fed survey similarly found a growing share of households expecting their financial situation to worsen rather than improve over the next year.
At the same time, federal assistance programmes have become a central policy debate. The Trump administration recently highlighted efforts that it said reduced SNAP participation by roughly 2.4 million people. Meanwhile, the One Big Beautiful Bill Act includes approximately $186bn in SNAP reductions over a decade, representing a 20% cut in programme funding.
Children and older Americans account for a substantial share of SNAP beneficiaries, making them particularly exposed to any reduction in benefits. Additional changes affecting healthcare programmes and subsidies could further influence household budgets in the years ahead.
For investors, policymakers, and businesses, the key question will be whether slowing inflation can restore purchasing power quickly enough to offset the growing strain evident in household finances. Future consumer spending trends may depend less on headline economic growth and more on whether lower-income Americans begin to see meaningful relief from the cost of living.
