Board of Governors of the Federal Reserve System

Overall Financial Security

The substantial layoffs that occurred in March and April upended the lives of many families. However, by July, some people had returned to work and others were receiving financial assistance. As a result, there was an uptick in the overall rate of financial well-being in July. Seventy-seven percent of adults in July indicated that they were either "doing okay" financially or "living comfortably." The rest were either "just getting by" or "finding it difficult to get by." The 77 percent of adults doing at least okay financially in July reflects an improvement since early April, when 72 percent were doing at least this well. In October 2019, 75 percent of adults were at least doing okay financially.¹²

When comparing individual-level responses, most people reported that they were equally as well off in July as they had been in October. Nineteen percent of adults reported a higher level of financial well-being, compared to 17 percent who were worse off financially than in the fall. The remainder reported the same level of well-being as they did in October. Even though the scale of layoffs during the pandemic has been unprecedented, this stability reflects the fact that many people did not personally experience a layoff. Additionally, enhanced unemployment insurance benefits, Economic Impact Payments, and other financial support measures blunted the potential negative financial effects for many families.

Although substantial gaps in the rate of well-being across racial and ethnic groups remained, self-reported financial well-being for White, Black, and Hispanic adults in July were all consistent with the rates seen in late 2019. White and Hispanic adults saw slight upticks in their overall rates of well-being, although self-reported financial well-being among Black adults fell by 1 percentage point (table 2).

Table 2. Share of adults at least doing okay financially (by demographic characteristics and year)

Consistent with the earlier observations that layoffs from the pandemic most affected lower-income workers, individuals experiencing an employment disruption typically had lower pre-pandemic well-being than those who did not. Two-thirds of those who experienced a disruption were doing at least okay financially in the fall. This compares to 79 percent of those who did not experience a disruption who were doing at least okay financially before the pandemic.

Changes in financial well-being since the fall
were closely tied to maintaining—or regaining—employment. Those who did not experience a layoff or a reduction of hours were, on average, faring at least as well as they were last fall. Those who were laid off or saw their hours reduced but were working at least in some capacity in July reported slight declines in well-being, although the change was relatively modest (figure 12).

For those who were laid off and were not working in July, the magnitude of the decline in well-being depended on whether they received unemployment insurance benefits. Those who were laid off and received unemployment insurance saw a 5 percentage point decline in the share doing at least okay financially. However, among those who were laid off and did not receive unemployment, financial well-being declined by 9 percentage points since the fall. Forty-three percent of the group that was not receiving unemployment insurance benefits indicated that they were doing at least okay—down from 52 percent in October 2019.

Ability to Pay Bills

Consistent with the pattern in overall financial well-being, 85 percent of adults said they could pay all their current month's bills in full in July, about the same as in the fourth quarter of 2019 (84 percent) and above the 81 percent who were able to do so in April.¹³ Yet, those experiencing employment disruptions were disproportionately likely to have difficulty paying bills, on average. Of adults who were laid off, were still not working, and had not received unemployment benefits, 54 percent expected to be able to pay all their bills in full in July (figure 13). Among those who were not working but had received unemployment benefits and among those who had returned to work, higher shares said they could pay all their bills in full. Nonetheless, these groups were still less likely to be able to cover all their bills than those who had not experienced an employment disruption.

In part, this difference in bill payment rates reflects financial circumstances from before the pandemic. But those who were still not working after a disruption and did not receive unemployment benefits also fared worse during the pandemic. Laid-off adults who were not working and not receiving unemployment benefits showed the largest decline in ability to pay their bills. Fifty-four percent of this group expected to be able to pay all of their bills in full in July, whereas 64 percent of the same people were able to do so in October. In contrast, those who had not experienced an employment disruption showed no change in their ability to pay bills, on average. Those who experienced a disruption and received unemployment insurance benefits or were working in July were also nearly as likely to be able to pay their bills in full as they were last fall.

Of people who could not pay all their bills in full in July, this most frequently involved not paying a credit card bill or making only a partial payment on it (table 3). Yet, 42 percent of those who were not able to pay all their bills in July (6 percent of all adults) said that their rent, mortgage, or utility bills would be left at least partially unpaid in July.

Table 3. Bills to leave unpaid or only partially paid in July

Handling Small Financial Emergencies

A sizeable share of adults in July appeared to be better able to handle a small financial emergency than in April or in the fall. Among all adults, the share who reported they would pay an unexpected $400 emergency expense entirely using cash, savings, or a credit card paid off at the next statement increased by 6 percentage points—from 63 percent in October to 70 percent in July (table 4).¹⁴ In April, 64 percent of adults said they would pay a small emergency expense in this way. While improvements since October were evident across all groups, increases were particularly notable for Hispanic adults, those living outside of metropolitan areas, and those in lower-income families. However, since this is a measure of how people would pay the $400 expense, rather than whether they could pay, it is also possible that changes in credit availability or people's desire to use credit could contribute to these results.

Table 4. Would cover a $400 emergency expense completely using cash or its equivalent (by year)

Similar to the findings for the ability to pay bills, those who experienced a layoff or an hours reduction were less likely to report they would pay an unexpected $400 expense with cash or the equivalent (figure 14). Furthermore, those who did not experience an employment disruption saw the largest gain in this measure, while those who lost a job and were not working in July and had not received unemployment benefits showed the least change, relative to responses in fall 2019.

The share who would pay cash or its equivalent for a small emergency improved at all income ranges, but did so the most for low- and middle-income adults (figure 15). This may be due to the income boost experienced from Economic Impact Payments. These payments went to nearly everyone with incomes below the income limits, including those not experiencing an employment disruption—the group that showed the greatest improvement in this emergency savings measure. Additionally, because these payments were fixed below the phaseout limits, the effect on family incomes would be proportionately greater for those with lower incomes.¹⁵ These increases in the share who would pay a small emergency expense with cash or the equivalent are also consistent with estimates indicating that the personal savings rate increased and average daily balances in checking accounts rose in the early months of the pandemic.¹⁶

Footnotes