ROCKLAND COUNTY, N.Y.–While the economic fallout from the coronavirus to date has largely taken its toll on lower wage and gig workers, one new analysis suggests CUs should be preparing for the crisis to wreak a particular kind of havoc on the debt-laden middle class.
Debt didn’t present a major problem before the coronavirus. The job market was booming and median household incomes were rising, allowing families to keep up with payments, noted the Wall Street Journal.
But conditions are changing.
According to the Journal’s analysis, American families with nonhousing debt making over $98,018 a year in pre-tax income owed an average of nearly $92,000 of such debt in 2016. That’s up 32% from 2004, adjusted for inflation, according to an analysis of Federal Reserve data by the Employee Benefit Research Institute, a nonpartisan nonprofit research group.
Meanwhile, the average nonhousing debt owed by families making $52,655 to $98,018 rose about 33% over the 12 years to $33,378.
A ‘Core Assault’
Before the pandemic, Americans had amassed $4.2 trillion in consumer debt, excluding mortgages, according to the Federal Reserve Bank of New York, a record even when adjusting for inflation. Housing debt added an additional $10 trillion to the tally, the Journal noted.
“What I see happening here is a core assault on successful college-educated families, which are the new breed of middle-class American families,” Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce, told the Wall Street Journal. “There’s a professional workforce that’s getting slammed.”
The Journal analysis pointed out unemployment has fallen from its pandemic peak of near 15%, but the rate stood at 8.4% in August, up from 3.5% in February, according to the Bureau of Labor Statistics. Unemployment for the arts, design, media, sports and entertainment was 12.7% in August, more than triple its year-earlier level. In education, it more than doubled to 10.2%. Sales and office unemployment was 7.8% in August, up from 3.8% in August 2019, the Journal said.
‘White-Collar Layoffs’
The Journal cited additional data showing architects and engineers, who earn $1,826 in average weekly pretax income, well above the $1,389 average among full-time wage and salaried workers, have seen unemployment rise to 3.7% from 0.8% a year earlier. Unemployment for computer and math occupations, which earn $1,919 a week on average, more than tripled to 4.6%.
It could get worse. “The pain so far in the economy has largely been at the lower end of the pay scale,” Discover Financial Services Chief Executive Roger Hochschild told the Journal, adding that many of “the white-collar layoffs are still to come.”