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This is underscored by a new report from the Federal Reserve, which also highlights how job losses during the coronavirus outbreak have been severe for lower earners.
Many households already had fragile finances before the coronavirus outbreak upended the economy, and lower earners are now among those taking the hardest hits when it comes to unemployment, new survey research from the Federal Reserve shows.
Millions of American workers have been thrust into new financial uncertainty as they have lost their jobs and seen hours and earnings cut in recent weeks. Small businesses are also reeling.
Almost 3 million people filed unemployment claims last week, the Labor Department said on Thursday, driving the number of people who’ve applied for unemployment insurance benefits during the past two months to around 36 million.
Unemployment is near 15%, a level not seen since the Great Depression era.
A part of the new Fed report features survey results from April that gauge how the coronavirus was affecting household finances at that time.
From the start of March through early April, 19% of adults reported either losing a job, getting furloughed, or having their hours cut. Among this group, upwards of one-third said they anticipated having difficulty paying their bills in April.
Job losses were especially severe among lower-income workers. Thirty-nine percent of those working in February who had a household income below $40,000 reported a job loss in March.
Only 64% of people experiencing employment disruptions said they expected to be able to pay all of their bills in full in April, compared to 85% of those working as they had been previously.
These troubling findings about the downturn’s effect on low-income earners in part could reflect long standing economic instability for many families.
The report says that in late 2019 about 75% of adults were either doing okay or living comfortably financially, a statistic unchanged from the prior year and up 13 percentage points from 2013.
But last year, prior to the onset of the coronavirus outbreak, 16% of adults said they did not expect to pay all of their monthly bills in full at the time when they were surveyed in October.
Another 12% said they would be able to cover their current bills, but would be unable to do so if they were confronted with an unexpected $400 expense they had to pay.
People without college degrees, racial and ethnic minorities, and those carrying unpaid debts, including medical and legal bills, were more likely last fall to be struggling with monthly expenses, or in a weaker position to handle financial setbacks, the report says.
Among the subset of people who expected to defer at least one bill in the month when they were surveyed, 45% said this was likely to involve not paying a credit card bill, or making a partial payment. But 23% said they would not pay, or would only partly pay, their rent or mortgage and nearly one-third said the same about utility bills.
The survey also found that, as of late last year, 53% of people had set aside emergency savings or “rainy day” funds. But 3-in-10 adults said that if they lost their main source of income, they would not be able to cover three months of expenses by any means.
A possible bright spot with the survey is that about 90% of respondents who’d lost their jobs in recent months said their employer indicated that they would be able to return to their positions in the future.
The financial toll of the virus could also have implications for retirement savings. Late last year, one-quarter of non-retired adults surveyed said they didn’t have anything saved for retirement. Fewer than four-in-10 felt their retirement savings were on track.
In recent weeks, governments across the U.S. have ordered businesses to close and told people to stay home to help prevent the spread of the coronavirus. Some states are now rolling back those restrictions, but the economy is still sputtering along.
A full copy of the Federal Reserve’s report can be found here.
Bill Lucia is a senior reporter for Route Fifty and is based in Olympia, Washington.