COVID-19 Fallout: Lower-Income Earners Hit Hardest By Job Losses

TOPLINE

American workers who live in households earning under $40,000 were disproportionately affected by job losses and furloughs from the coronavirus-related shutdown than those in households in higher income brackets, according to a new Federal Reserve survey released Thursday that highlights the dramatic effects of the virus—and economic shutdown—on lower-income Americans.

KEY FACTS

The survey found that 39% of workers living in a household earning $40,000 or less lost a job or were furloughed in March, compared 19% of individuals in households making between $40,000 and $100,000, and 13% in those households making more than $100,000.

Another 6% of all adults worked reduced hours or went on leave without pay.

These numbers are particularly troubling because many Americans, including a preponderance of the segment of the population hardest hit (lower-income earners), were ill-equipped to handle a drastic downturn in the economy.

Per the Fed report, at the end of 2019, three in 10 adults said they could not cover three months’ worth of expenses with savings or borrowing in the case of a job loss, “indicating that they were not prepared for the current financial challenges.”

Among those adults not experiencing a job loss or reduction in hours, 76% were doing at least “okay” financially in April; whereas, among those who had been laid off or had their hours cut, 48 percent were “finding it difficult to get by” or “just getting by,” according to the survey.

The survey found that 13% of all U.S. adults, or 20% of those employed in February, were laid off or furloughed as the pandemic began forcing state and local governments to institute stay-at-home orders.

Critical quote: 

“This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future,” Fed Chairman Jerome Powell said in a speech Wednesday

Key Number:

Just 64% of individuals who lost their jobs or were working fewer hours in March felt that they would be able to pay their bills in April.

Key Background:

The Federal Reserve’s annual report customarily focuses on the economic wellbeing of U.S. households as of the end of the previous calendar year. However, Thursday’s report was supplemented with a survey conducted in early April, as financial conditions changed dramatically for many families due to the spread of COVID-19. The Fed data was released mere hours after the Labor Department reported that workers filed almost 3 million new unemployment claims last week, pushing the two-month total north of 36 million.

In the many weeks since the survey was conducted, lawmakers have supplied $2 trillion in relief spending, including expanded unemployment insurance and forgiving loans to small businesses. However, most families would not have received any form of financial relief at the time they responded. Nonetheless, the survey indicated that the vast majority of Americans remained optimistic in early April. Among those who lost a job in March 2020, 91 percent anticipated that they would return to work for the same employer or indicated that they had already returned to work.

Tangent:

The Fed report confirmed that differences in financial wellbeing across racial and ethnic groups also persisted in America in 2019. Results revealed that two-thirds of black and Hispanic adults reported that they were doing at least “okay” financially, compared to eight in 10 white adults. Twenty-five percent of black and Hispanic adults were not working full time and wanted more work in late 2019. Unsurprisingly, there was a positive correlation between economic wellbeing and increased education, although the effects differed across demographic groups. Approximately 53 percent of those with jobs worked from home at the end of March. More than 60 percent of workers with at least a bachelor’s degree worked entirely from home, compared to only 20 percent of those with a high school degree or less. The survey also found that more than six in 10 black and Hispanic young adults who left or did not begin college did so, at least in part, to support their families financially.

Further Reading:

Report on the Economic Well-Being of U.S. Households in 2019, Featuring Supplemental Data from April 2020 (Federal Reserve) 

Poor Americans Hit Hardest by Job Losses Amid Lockdowns, Fed Says (New York Times) 

Fed’s Powell: More spending from Congress ‘costly but worth it’ (Politico)

Poorest Americans Hit Hard by Pandemic Job Losses (Bloomberg)

 

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