The Economy

Households’ Money Problems Started Back in March

About 13% of adults reported that they lost a job or were furloughed in March or the beginning of April this year.

Since consumer spending drives so much of the U.S. economy, a worsening of family finances can be the canary in the coal mine for many industries.

The Federal Reserve on Thursday released its regular survey of U.S. households’ economic well-being. While most of the data (concerning 2019) was irrelevant, the Fed did include supplemental data from a special survey taken in April 2020.

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Unsurprisingly, the results showed that many U.S. families face difficult times ahead as a result of the COVID-19 pandemic. And it started way back in March.

About 13% of adults reported that they lost a job or were furloughed in March or the beginning of April this year. The job losses were most severe among households with incomes below $40,000. Of those people, 39% were laid off or furloughed. (See chart below.)

While nine in 10 of the people who lost a job said that their employer indicated that they would return to their position at some point, 77% said they hadn’t been given a date of expected return.

Naturally, rising unemployment is cutting into household incomes. Overall, 23% of adults said their income in March was lower than in February. Among those who lost a job or had their hours reduced, 70% reported that their income declined. But even some who didn’t have reduced hours or were unemployed (12%) had a drop in income, which could reflect temporary salary cuts instituted by many U.S. employers.

Two-thirds of those who lost a job or had hours reduced expected to be able to pay all their bills in full in April, compared with 85% who did not have an employment disruption.

The supplemental survey also showed that the ability to work from home all the time was mostly the province of workers with higher levels of education. Sixty-three percent of workers with at least a bachelor’s degree worked entirely from home, but among workers with a high school degree or less, only 20% could work entirely from home. (See chart below.)

On average, those with more education also had more leave available in case they got sick. One-fifth of employed adults, however, reported that they could not take any time off without a reduction in income.

The Fed’s survey ran from April 3 to April 6, and had 1,030 respondents from a special panel of consumers.