The Board of Governors of the Federal Reserve System just published its 172-page annual Report on the Economic Well-Being of U.S. Households in 2016.
First, the good news:
- “Overall, the modest improvements in financial well-being that were observed in recent years continued into 2016” with 70% of adults reporting “that they are either living comfortably or doing okay financially,” compared to 69% in 2015 and 62% in 2013.
- “Compared to previous years, fewer adults are ill-prepared for a modest financial disruption”.
These marginal improvements aside, the report contains some disturbing information although the U.S. supposedly is nearly eight years into an economic recovery:
- As many as 30%, or approximately 73 million adults, are either finding it difficult to get by or are just getting by financially.
- 13% of adults struggle to pay their bills in some months due to “income volatility” or month-to-month variability, while just under one-fourth of adults are not able to pay all of their current month’s bills in full.
- 44% of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money. (In 2013, the percentage was an even more alarming 50%.)
- 47% of adults of adults report that their income exceeded their spending in the prior year.
- 46% of adults with a credit card report that they are carrying credit card debt.
Some other findings:
- Education, specifically a college education, makes a big difference:
- 40% of adults with a high school degree or less report that they are struggling financially, compared to 17% of those with at least a bachelor’s degree.
- 82% of adults with a bachelor’s degree or more in education said last year they were “living comfortably” or “doing okay,” up from 80% the year before, as well as 69% of those with some college or an associate degree, up from 66%.
- 79% of those with at least a bachelor’s degree vs. 52% of those with only a high school diploma said they would still be able to pay all of their other bills in full if hit with a $400 charge.
- Whites are slipping behind other races: “Non-Hispanic white adults with a high school degree or less are somewhat less likely than those of other races and ethnicities or those with more education to report that their financial well-being improved in 2016.”
- 28% of adults who haven’t yet retired reported to being grossly unprepared, which suggests they have no retirement savings or pension.
- Healthcare costs continue to be a burden:
- 23% of adults had to pay a major unexpected out-of-pocket medical expense in the prior year.
- 1/4 of adults report forgoing one or more type of health care in the prior year due to affordability.
- Approximately 24 million people, representing 10% of adults, are carrying debt from medical expenses that they had to pay out of pocket in the previous year.
ZeroHedge reports that commenting on the report’s findings, Federal Reserve Governor Lael Brainard, a Hillary Clinton supporter, said:
“the survey findings remind us that many American households are struggling financially, including fully 40 percent of those with a high school diploma or less. More broadly, 44 percent of all respondents could not cover an unexpected $400 emergency expense or would rely on borrowing or selling something to do so. The survey also shows that many adults have no savings for retirement.”