Many U.S. households find themselves in a fragile position financially, even in an economy with an unemployment rate near a 50-year low, according to a Federal Reserve survey.
The Fed’s 2018 report on the economic well-being of households, published Thursday, indicated “most measures” of well-being and financial resilience “were similar to, or slightly better than, those in 2017.” The slight improvement coincided with a decline in the average unemployment rate to 3.9% last year, from 4.3% in 2017.
But despite the advance, the results of the 2018 survey indicated that almost 40% of Americans would still struggle in the face of a $400 financial emergency. The statistic, which was a bit better than in the 2017 report, has become a favorite rejoinder to President Donald Trump’s boasts about a strong economy among Democratic politicians, including 2020 presidential candidate Kamala Harris, the U.S. senator from California.
“Relatively small, unexpected expenses, such as a car repair or replacing a broken appliance, can be a hardship for many families without adequate savings,” the report said. “When faced with a hypothetical expense of $400, 61% of adults in 2018 say they would cover it, using cash, savings, or a credit card paid off at the next statement,” it added.
“Among the remaining 4 in 10 adults who would have more difficulty covering such an expense, the most common approaches include carrying a balance on credit cards and borrowing from friends or family,” according to the report.
Based on a survey of 11,000 people in October and November 2018, the report showed a quarter of Americans don’t feel like they are doing “at least OK” financially. That number was higher for black and Hispanic Americans, at roughly one third for both. For those making less than $40,000 a year, the share who felt they weren’t doing well was 44%.
“We continue to see the growing U.S. economy supporting most American families,” Fed Governor Michelle Bowman said in a press release accompanying the report.
“At the same time, the survey does find differences across communities, with just over half of those living in rural areas describing their local economy as good or excellent compared to two-thirds of those living in cities,” Bowman said. “Across the country, many families continue to experience financial distress and struggle to save for retirement and unexpected expenses.”