Fewer than four in 10 Americans could handle an unexpected $1,000 expense such as a medical bill or car repair, according to Bankrate.com. That comes after the federal government has seeded the economy with trillions in stimulus funding, ranging from stimulus payments to extra unemployment aid.
Without that help, it’s likely that U.S. households would be in worse shape. The share of Americans who could handle an unexpected $1,000 expense is slightly down from the year before – 39% in the most recent survey compared with 41% a year earlier, the survey of more than 1,000 people in mid-December found.
Americans in the spring and summer of 2020 were able to set aside money in their savings accounts and pay down debt thanks to the financial boost from the Coronavirus Aid, Relief, and Economic Security Act (or the CARES Act). But by the end of 2020, personal disposable income had fallen sharply from the boost given by the CARES Act, according to a new analysis of financial data from the Brookings Institution’s Hamilton Project.
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That means millions of households entered the winter months with less financial flexibility, even as the pandemic rages across the U.S. and employers cut jobs in December.
“Despite prospects for a much brighter end to 2021 than the beginning because of vaccinations, we have to get from here to there first,” said Greg McBride, the chief financial analyst at Bankrate.com. “There will be a lot of economic weakness and financial hardship before then.”
Already, there are signs of rising hardship among some households. About 90 million adults, or almost 4 in 10, reported it was somewhat or very difficult for their households to pay their usual expenses in the past seven days, according to a new Center on Budget and Policy Priorities analysis of Census data from mid-December. That represents a rise of 13 million adults since late August, the think tank said.
“It’s clear households were beginning to run on fumes by the end of the fall,” said Wendy Edelberg, director of the Hamilton Project. “That’s one of the reasons why economists like me were screaming and yelling for Congress to do more.”
To be sure, the Bankrate.com and Census data took the temperature of financial health before the latest stimulus was passed, a $900 billion relief bill that is now distributing $600 stimulus payments to eligible adults and children, as well as providing an extra $300 in weekly unemployment aid. But those benefits provide half of the CARES Act’s $1,200…
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