The situation: The US is in a cost-of-living crisis. Households across income levels face pressure as paychecks fail to cover expenses.

• Two-thirds (67%) of Americans now live paycheck-to-paycheck, a 4 percentage point increase from last year, according to PNC’s Financial Wellness in the Workplace Report. That aligns with the 65% of Americans who say they feel financially squeezed at least some of the time each month—up from 58% in June 2024, per the Axios Vibes survey by the Harris Poll.
• The reason is clear: Wages aren’t keeping up with costs. Since August 2020, private-sector pay has risen 23.3%, according to the Bureau of Labor Statistics (BLS). Yet household expenses have grown faster. Grocery prices are up 24.7%, housing costs (as measured by BLS’ Owners’ Equivalent Rent metric) are up 28.2%, and energy prices have surged 43.3%.

Relief isn’t in sight. Tariffs are pushing prices higher; a weakening labor market is eroding wage growth; student loan debt is squeezing disposable income; and insurance premiums are soaring. It’s little wonder, then, that consumers feel pessimistic: The University of Michigan Consumer Sentiment Index in September dropped below levels seen during the 2008–2009 recession, while the Conference Board’s Consumer Confidence Index fell beneath its June 2022 reading, when inflation peaked.

Zooming in: The pressure on consumers—and by extension, brands and retailers—is severe.

• The labor market is showing cracks. The US lost 32,000 private-sector jobs in September, per ADP, following a revised loss of 3,000 in August. That was well short of the 45,000 gain economists polled by The Wall Street Journal had expected. ADP’s data exclude government workers, but if President Donald Trump follows through on his threat of mass federal layoffs during the current government shutdown, conditions could rapidly worsen.
• Student loans remain a heavy drag. The unpaid federal student-loan balance has ballooned to $1.66 trillion, up from $516 billion two decades ago. Of the 44.7 million borrowers, about 5 million are more than 90 days past due, according to Federal Student Aid. That debt is reshaping financial choices as 45% of borrowers say they have delayed major decisions like buying a home or car, per Empower.
• Even affluent consumers are starting to feel the squeeze. After years of defying broader housing trends, the luxury home market is cooling: Nationwide sales in the three months ended August 31 fell to their lowest level for that period since Redfin began tracking in 2013. At the high end of grocery, Whole Foods chief merchandising and marketing officer Sonya Gafsi Oblisk recently noted that customers are becoming more value-conscious and deliberate about spending.

To cover essentials, households are leaning on credit cards.

• Balances climbed to $1.21 trillion in Q2, up 2.3% from the prior quarter and matching last year’s record high, according to the New York Fed.
• Consumers are also shifting spending toward necessities: Nearly half (46%) cite groceries as their top monthly priority, while 13% list gasoline, per TD Bank survey data reported by CNBC.

Our take: Amid this challenging environment, retailers and brands need to double down on value.

• That can mean expanding value-oriented private labels. Amazon, for instance, launched Amazon Grocery, a private-label line with most items priced under $5, aimed squarely at inflation-stung shoppers both online and in Amazon Fresh stores.
• It also means leaning harder on discounts and promotions. A growing share of consumers say they won’t buy unless they get a deal. In a June 2025 Inmar Intelligence poll, 55% of shoppers cited discounts, coupons, and promotions as the biggest influence on holiday purchases—ahead of convenience (43%) and even product reviews (35%).
• Finally, brands should lean on loyalty programs to engage and reward top customers with early sale access, bonus points, and exclusive discounts.

Go further: Read our FAQ: What would a recession mean for advertising, commerce, and financial services?