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Making Ends Meet series: Changes in consumer financial status during the early months of the pandemic

Beginning in March 2020, the coronavirus pandemic sent the U.S. economy into one of the sharpest recessions in recent history. Millions were laid off, either temporarily or permanently, as restrictions went into effect to help reduce the spread of the virus. By June, the unemployment rate had risen to 11.1 percent, with almost 31 million people claiming unemployment insurance benefits.

A new report in our Making Ends Meet survey series finds that, despite these volatile economic conditions, the average consumer’s financial status and ability to stay on top of their finances improved between June 2019 and June 2020. These results suggest that public and private interventions, such as expanded unemployment benefits and loan forbearance, alongside consumers’ own spending reductions, helped to buffer household finances during the initial months of the pandemic. Public policy interventions meaningfully supported consumers’ financial status early in the pandemic. Many of these programs will eventually end and their end will likely have a significant impact on consumers’ financial status going forward unless additional actions are taken.

Making ends meet in the initial months of COVID-19

To understand consumers’ ability to make ends meet, we surveyed a comprehensive national sample of individuals with a credit record in June 2019 and June 2020. Using a combination of survey responses and credit records, we measured changes in consumers’ credit scores, difficulties paying for a bill or expense, and financial well-being scores. (Developed by the Bureau, the financial well-being score measures a consumer’s ability to take control of their day-to-day finances, absorb a financial shock, and stay on track to meet their financial goals.) We found that fewer consumers had difficulty paying a bill in the initial months of the COVID-19 pandemic than one year earlier and that both credit and financial well-being scores increased. These improvements were largely consistent across demographics like race, ethnicity, gender, rural status, and income.


Metric

June 2019

June 2020

Difference

CFPB Financial Well-Being Score 

51.1

52.1

 +1* 

Percentage of individuals who had difficulty paying for a bill or expense in the previous year 

40

36

 -4* 

Credit Score 

699

710

 +11* 


As the pandemic and resulting recession took their toll on consumers—especially those most economically vulnerable—governments responded with policies to expand unemployment benefits, while financial institutions offered various forms of debt relief and forbearance. The combination of these policies prevented large dips in income and sudden inability to make debt payments among many newly unemployed consumers.

Many consumers’ financial status declined, despite the average increase. Our results show that it was consumers whose income or savings decreased, regardless of whether they became unemployed, who were more likely than others to experience reduced financial well-being and credit scores. Forbearance appears to have helped consumers who were having difficulty paying bills avoid a decline in financial well-being.

Other research examining the initial months of the pandemic reached similar conclusions: delinquencies reported to credit bureaus declined, credit card debt fell even for financially vulnerable consumers, bank account balances rose , and survey-based measures of financial conditions rose . Overall, consumers’ cash balances improved while consumer spending fell dramatically in the first months of the pandemic.

Differences in difficulty paying bills and expenses across groups

In both June 2020 and June 2019, Black consumers, Hispanic consumers, women, consumers with prior-year household income of $40,000 or less, and consumers with a high school degree or less (or a vocational degree) were each more likely to have experienced some difficulty relative to Non-Hispanic White consumers, men, and consumers with household income of more than $40,000 in the prior year.

These underlying disparities appear to have remained largely constant during the initial months of the pandemic. Between June 2019 and June 2020, most groups saw a drop in the frequency of experiencing a difficulty. The size of the survey means that we cannot confidently estimate small differences between groups, but can rule out large new disparities.


Percentage of consumers who reported having had difficulty paying for a bill or expense by demographic factors

 

Had Difficulty (June 2019)

Had Difficulty (June 2020)

Difference 

95% Confidence Interval

Overall

39.9

35.9

-4.0

-7.8 to -0.3

Race/Ethnicity

       

Non-Hispanic<br/>White

36.7

29.9

-6.8

-10.8 to -2.7

Black

64.6

66.5

1.9

-10.2 to 13.9

Hispanic

38.8

43.9

5.1

-8.0 to 18.1

Other

29.9

27.9

-2.0

-19.8 to 15.9

Household Income in 2018 

       

$40,000 or less

60.0

56.9

-3.1

-9.9 to 3.8

$40,001 to $70,000

37.7

33.7

-3.9

-10.9 to 3.0

$70,001 to $100,000

32.5

2.6

-6.5

-15.7 to 2.6

More than $100,00

16.5

14.4

-2.1

-9.3 to 5.2

Geographic Group

       

Metro

39.4

36.0

-3.4

-7.7 to 0.9

Some urban

44.3

34.6

-9.7

-16.0 to -3.3

Rural

41.1

36.9

-4.1

-9.0 to 0.8

Gender

       

Male

34.3

29.0

-4.8

-10.4 to 0.8

Female

45.5

41.7

-3.8

-9.5 to 0.9

Education Level in 2019

       

High school or less or vocational

53.7

51.2

-2.5

-9.2 to 4.3

Some college

36.9

35.3

-1.6

-8.7 to 5.6

College or post-graduate

32.1

24.1

-8.0

-13.2 to -2.8

Age Group

       

Age <40

46.3

37.9

-8.4

-17.6 to 0.7

Age 40-61

45.4

42.5

-2.9

-8.2 to 2.3

Age 62+

25.3

24.5

-0.8

-5.2 to 3.7


Studying the financial impacts of COVID-19 after June 2020

Although the financial status of the average consumer improved early in the pandemic, those gains may not have lasted. Financial distress may have increased after weekly $600 unemployment benefits under the CARES Act expired in July 2020. And unemployment remains higher than before the pandemic, especially for Black and Hispanic consumers.

The next wave of the Making Ends Meet survey is under way and will help us better understand how consumers have fared since June 2020.

View the full Making Ends Meet survey report: Changes in consumer financial status during the pandemic.

Other reports in this series studied consumers’ status before the pandemic, their savings and preparation for emergencies, and the credit card debt of financially vulnerable consumers during the pandemic.

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