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Coronavirus pandemic leading to 'unprecedented' financial pain for U.S. households, survey shows

·4 min read

Financial pain for U.S. households triggered by the coronavirus pandemic is starting to show, according to a new survey.

The survey, by Freedom Debt Relief, looked at how 2,335 Americans between the ages of 18 and 74 were dealing with their finances between March 25 to 27, which was after the national emergency was declared.

“Overall, Americans are reporting rapid and unprecedented levels of change in their financial situations since the COVID-19 pandemic arose in the United States,” Freedom Debt Relief President Sean Fox told Yahoo Finance. “Many have already lost their jobs or had their hours reduced. Others face an uncertain future and are trying to understand their long-term employment situation.”

A man wearing a mask carries toilet paper and paper towels in the Bushwick section of Brooklyn April 5, 2020 in New York. - The coronavirus death toll in New York state spiked to 4,159, the governor said, up from 3,565 a day prior. The toll increase of 594 showed a slight decrease in the day-to-day number of lives lost compared to the previous day.  Governor Andrew Cuomo told journalists it was too soon to tell whether the decrease from the previous record of 630 deaths in one day was statisically significant. (Photo by Bryan R. Smith / AFP) (Photo by BRYAN R. SMITH/AFP via Getty Images)
A man wearing a mask carries toilet paper and paper towels in the Bushwick section of Brooklyn April 5, 2020 in New York. (Photo: BRYAN R. SMITH/AFP via Getty Images)

The economy saw an unprecedented 6.648 million people applying for unemployment claims for the week ending March 28. On Friday, the March jobs reports showed that the economy shed 701,000 jobs when economists were expecting a decline of 100,000.

Economists are expecting 20 million U.S. workers to be furloughed or laid off by July because of the economic impact of the coronavirus. According to the St. Louis Fed, as many as 66 million jobs are at “high risk” of being in that situation.

(Graphic: David Foster/Yahoo Finance)
(Graphic: David Foster/Yahoo Finance)

The sentiments expressed in the survey echoed those grim figures: 35% of respondents said that the coronavirus has impacted their current financial situation, and 36% had experienced a reduction in pay or work hours.

“The breadth of the drop in household income is unprecedented,” said Fox.

The respondents were already finding it hard to pay their bills. The survey found that 56% of respondents were concerned about being able to afford to feed themselves and their family; 45% were already struggling to make rent or mortgage payments; 36% said they were likely to miss those payments “within the next six months”; and 30% of respondents said they were likely to miss their health insurance premium payment within the next six months.

The pain is likely to intensify, as many businesses remain shuttered through April.

Coronavirus cases are still on the rise. (Graphic: David Foster/Yahoo Finance)
Coronavirus cases are still on the rise. (Graphic: David Foster/Yahoo Finance)

Drowning in debt, waiting for the stimulus check

In February, weeks before coronavirus pandemic effectively shut down the U.S. economy, household debt in the country reached a record $14.15 trillion.

Nearly a quarter of the survey respondents reported more than $50,000 in overall unsecured debt, with more than half having less than $1,000 in savings and checking accounts combined (excluding retirement accounts). Furthermore, 35% indicated they will be taking money out of retirement savings.

And while the stimulus package recently signed into law was designed to offer some relief to millions of Americans, 31% of the survey respondents said that a single check up to $1,200 wasn’t going to be enough. (And for some Americans, that relief wasn’t even going to come until September.)

(Source: New York Fed)
Non-housing U.S. household debt as of Q4 2019. (Source: New York Fed)

Fox noted that delays “on the distribution of these funds will likely trigger a surge in credit card utilization in the short term and could complicate personal financial recoveries in the longterm.”

The IRS is planning to send paper checks first to the lowest-income Americans, i.e. those with incomes of $10,000 or less, starting April 24.

“People who don't get the stimulus checks right away are struggling to pay for food and are even facing foreclosure and eviction,” National Consumer Law Center’s Lauren Sanders told Yahoo Finance. “I heard today that some courts are doing eviction by telephone. People should not go to payday lenders. That will only make matters worse.”

Aarthi is a reporter for Yahoo Finance. Follow her on Twitter @aarthiswami.

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