WASHINGTON–A new Fed report on the financial well-being of American households won’t come as a huge surprise—it’s not so well.
In a quick and surprisingly fast reversal of where households stood at the end of 2019, the Fed’s new Report on the Economic Well-Being of U.S. Households, Featuring Supplemental Data from April 2020, found financial conditions changed dramatically for people who experienced job loss or reduced hours during March 2020 as the spread of COVID-19 intensified in the United States.
The Fed said the report draws from the its seventh annual Survey of Household Economics and Decisionmaking (SHED), which examines the economic well-being and financial lives of U.S. adults and their families.
The updated information is based on a survey of just over 1,000 adults and conducted from April 3 to April 6, with a focus on labor market effects and households' overall financial circumstances at that time.
Big Change Over 4 Months
“In April 2020, fewer adults reported that they were at least doing OK financially than had been the case six months earlier,” the Fed said in releasing the new report. “The April supplemental survey showed that 72% of adults were either ‘doing OK’ financially (43%) or "living comfortably" (29%).”
The Fed noted those numbers were down from the 75% of adults who were at least doing OK financially and the 36% who were living comfortably in the fall of 2019.
"A clearer understanding of how families are coping with the changed economic landscape is vital as the Federal Reserve considers next steps to address fallout from the pandemic," said Governor Michelle W. Bowman. "The survey data show that early in the public health crisis, a larger fraction of Americans were facing financial hardship than in the fall of 2019."
The Fed survey found the declines in self-reported financial well-being were concentrated among those who lost a job or had their work hours cut. Among adults not experiencing a job loss or reduction in hours, 76% were at least OK financially in April, which is similar to the overall share of adults who reported being at least OK financially in the fall.
Among those who experienced a job loss or hours reduction, 51% indicated that they were doing at least okay financially in April, whereas 48% were "finding it difficult to get by" or "just getting by,” the Fed reported.
Additional Findings
Other findings:
- 13% of adults, representing 20% of people who had been working in February, reported that they lost a job or were furloughed in March or the beginning of April 2020.
- Another 6% of all adults saw their hours reduced or took unpaid leave. Taken together, 19% of all adults reported either losing a job or experiencing a reduction in work hours in March.
- “Despite these widespread employment losses, some people took on new or additional employment in March. Seven percent of adults reported that they increased their hours worked or worked overtime,” the Fed reported.
- Many people who lost a job remained connected to their employer and expected to return to the same job eventually. Nine in 10 people who were furloughed or lost a job said that their employer indicated that they would return to their job at some point. “In general, however, people were not told specifically when to expect to return to work. Seventy-seven percent said that their employer told them to expect to return, but did not give them a return date,” the Fed said.
- Consistent with the employment declines in March, many people experienced income declines. Twenty-three percent of all adults, and 70% of those who lost a job or had their hours reduced, said their income in March was lower than in February.
- 81% of adults said they could pay all the current month's bills in full in April, compared to 84% in the fourth quarter of 2019. “Yet, the survey found far greater rates of difficulty among those experiencing employment disruptions,” the Fed said “Sixty-four percent of adults who reported a job loss or reduction in hours expected to be able to pay all their bills in full in April, compared to 85% of those without an employment disruption.”
Other Challenges
In addition to monitoring how households were faring near the onset of the COVID-19 pandemic, the report also highlights continuing financial concerns for many households that predated the public health crisis.
According to the Fed, some of these financial challenges include the 25% of non-retired adults who lack retirement savings, the 18% of adults with outstanding debt from medical treatments, and the 3% of people who do not own their home who experienced an eviction in 2018 or 2019.
The Fed noted three-in-10 adults in 2019 said they could not cover three months of expenses using their savings or borrowing in the case of a job loss, indicating that they were not prepared for the current financial challenges.
The full report can be found here.