Business Environment Profiles - United States
Published: 16 July 2025
Poverty rate
11 %
-0.4 %
The poverty rate represents the percentage of the US population below the poverty line set by the US Census Bureau. This line is calculated by the inflation-adjusted cost of a basket of necessary goods and services. Data is sourced from the US Census Bureau.
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The US poverty rate is estimated at 12.4% in 2025, reflecting a modest increase from the previous year. The upward movement can be attributed primarily to the impact of elevated interest rates and persistently high inflation, despite recent monetary policy actions by the Federal Reserve aimed at loosening financial conditions. This increase in the poverty rate during 2025 follows a brief period of improvement in 2023, when resilience in the broader economy limited a rise in poverty even amid inflationary pressures and historically high interest rates. However, the inability of wage growth to consistently outpace inflation through 2024 and into 2025, combined with labor market challenges, contributed to renewed upward pressure on poverty.
The poverty rate experienced small but notable shifts tied closely with macroeconomic developments from 2020 to 2025. In 2021 and 2022, the poverty rate hovered near 11.5% as the effects of pandemic-related unemployment continued, but government stimulus programs and a low-interest-rate environment mitigated large spikes in poverty levels. These interventions provided a buffer for vulnerable households and prevented more severe increases in the poverty rate. As the economy began to recover, 2023 saw the poverty rate fall by 0.4%, despite persistent inflation and higher borrowing costs, suggesting a relatively strong labor market and sustained, if uneven, economic growth. Entering 2024 and 2025, renewed increases in the poverty rate were recorded, with a cumulative rise of 1.3% over these two years. This reversal was primarily driven by the extended effects of high interest rates and inflation, which reduced real incomes and hampered the purchasing power of those at the lower end of the income distribution.
Macroeconomic factors such as fluctuating employment levels, inflation, and adjustments in monetary policy have played key roles in shaping the poverty rate's recent trajectory. The interaction between these drivers and policy interventions, notably stimulus and Federal Reserve rate decisions, has dictated the ability of at-risk populations to weather periods of economic stress. Rising housing costs, particularly in urban areas, have further contributed to modest increases in the poverty rate during the period by eroding the real value of incomes for households close to the poverty threshold.
During the five years to 2025, the US poverty rate declined only marginally at a rate of -0.2%, fluctuating in response to broader economic cycles and policy responses. While temporary declines highlighted periods of economic strength, increased inflation and higher interest rates produced an environment of financial strain for lower-income households, limiting overall improvement in poverty levels.
The poverty rate is projected to begin decreasing, reaching an estimated 11.0% in 2026. This impr...
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