American Households Remain Financially Fragile Despite Booming Job Market -- Update
23 May 2019 - 06:49PM
Dow Jones News
By David Harrison
WASHINGTON -- Many American households remain financially
fragile and uncertain about their retirement prospects despite a
booming job market that is lifting wages, according to a Federal
Reserve survey released Thursday.
One-quarter of working individuals say they have no retirement
savings at all, the survey said, and 44% worry that their saving
isn't on track. Among younger workers, aged 18 to 29, 42% have
nothing set aside, and only 26% believe they are adequately
prepared for retirement.
Households are also struggling to cover their day-to-day
expenses, the survey found, with 17% saying they wouldn't be able
to pay all their bills during the month of the survey. In most
cases, that means they expect to forgo making part of their rent,
mortgage, credit card or utility payments.
Roughly a quarter of adults skipped medical care in 2018 because
they were unable to pay, and about 40% have unpaid debt from
unexpected medical bills incurred last year.
And almost 40% of Americans said they don't have enough cash on
hand to cover an unexpected $400 expense. In most cases, they said
they would rely on credit-card balances or loans from family and
friends.
The Fed has conducted its annual survey of household well-being
since 2013. Over the past six years, the results suggest a steady
improvement in Americans' economic situation.
But the large share of households who still report some form of
financial vulnerability could be a sign that the improvements the
economy has made over the past decade haven't been sufficient to
allow many families to move beyond living paycheck to paycheck.
In a speech earlier this month, Fed governor Lael Brainard said
those households would suffer more in a downturn than those with a
bigger nest egg.
"Low levels of savings can create a challenging cycle when
material disruptions in income, or even small unexpected expenses,
spiral into a broader financial setback," she said.
Still, Americans are largely upbeat about their financial
situation, the survey found. Three out of four respondents said
they were doing OK or living comfortably, up from 63% in the 2013
survey. Nearly two out of three described their local economic
conditions as "good" or "excellent."
Irregular work schedules and volatile incomes could explain the
prevalence of shaky household finances in a strong labor
market.
About a quarter of employees have varying work schedules, and
17% say their schedules change based on their employer's needs,
often with three days' notice or less. Almost three out of 10 said
their household income varies from month to month.
Households with more volatile work arrangements reported having
trouble completing routine financial transactions. Those whose
incomes vary from month to month were more likely to struggle to
access funds in their bank accounts, even if their incomes are
relatively high. It can take several days for funds to be available
for withdrawal after they have been deposited.
The survey also found that racial gaps persist in household
finances. Two-thirds of black respondents said they were doing all
right financially, compared with 78% of white respondents, a gap of
12 percentage points that hasn't changed since 2013. Less than half
of black respondents, 47%, said their local economy was doing well,
versus 68% of white respondents.
Write to David Harrison at david.harrison@wsj.com
(END) Dow Jones Newswires
May 23, 2019 13:34 ET (17:34 GMT)
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