We may be getting through the pandemic, with light at the end of the proverbial tunnel, but the economic impacts still appear to be lingering.
To that end, the Federal Reserve said in a survey released Monday (May 17) that financial disruption was a key hallmark of the average household’s economic existence through the past year.
In the report, titled “Economic Well-Being of U.S. Households in 2020,” the Fed noted that “a clear pattern … is that financial challenges in 2020 were uneven, and frequently left those who entered the year with fewer resources further behind.”
The report describes the responses to the Federal Reserve Board’s 2020 Survey of Household Economics and Decision-making (SHED), a survey the Fed has done every fall since 2013.
With a bit more granular detail, the Fed found that nearly one-fourth of adults were worse off financially compared to 12 months earlier. That’s a sizable increase from the previous year, when the tally stood at 14 percent.
“This increase occurred broadly across the population, and likely reflects economic distress resulting from the pandemic,” the Fed found — and it’s also the highest reading since the Fed began asking the question in 2014.
And, in a nod to how individuals might perceive how they are doing, 75 percent of adults surveyed said that they were either doing “OK” or “living comfortably” — a number unchanged from 2019.
But drilling down into those metrics, the survey showed a significant skew when it comes to education. A significant percentage of adults with at least a bachelor’s degree (89 percent) said they were doing “at least OK,” which outpaces the 45 percent of adults with less than a high school degree, at 45 percent.
Layoffs were also skewed, according to the data, as 20 percent of employees in the 25- to 54-year-old age group were laid off, compared with 12 percent of those who had at least a bachelor’s degree. Overall, 16 percent of adults with less than a college degree were laid off in the prior year, compared with 11 percent of adults with at least a bachelor’s degree, said the Fed.
Spending Habits — And Financial Health
Adults also pulled back on their spending during the pandemic.
Most adults spent less than their income during the month before the survey, although the likelihood of doing so varied greatly by education, the Fed found. Spending declines were most prevalent among those with at least a bachelor’s degree, according to the report.
The Fed reported 14 percent of adults received unemployment income in the prior year, up substantially from the 2 percent recorded in 2019.
Most adults had a bank account at the end of 2020. However, “substantial gaps in use of, and experiences with, banking and credit services existed,”said the Fed, especially among lower-income families. More credit card holders who were laid off increased their credit card debt (39 percent) than kept their credit card debt the same or lower, the data showed.
With detail on meeting monthly expenses, more than one-fourth of adults had one or more bills that they were unable to pay in full that month. Or, said the Fed, these same respondents were one $400 financial setback away from being unable to pay them.