More Americans could afford a $400 emergency in July, thanks to government support
While the coronavirus devastated the economy, Americans' personal finances got in better shape than they did before the pandemic began thanks to government aid.
Seven in ten Americans said they could cover a $ 400 emergency with cash or the equivalent in July, a Federal Reserve survey found. This is the highest level since the survey began in 2013 and a sharp increase since October 2019, when only 63% were able to cover it.
"It worked, it helped families," said Claudia Sahm, a former chief economist on the Federal Reserve Board of Governors and now director of macroeconomic policy at the Washington Center for Equitable Growth. "And we see this, whether it's the incentives [checks], unemployment [benefits], or the wage and salary protection program."
The biggest improvement came from the low earners, with 45% of those earning less than $ 25,000 paying $ 400 in July, compared to just 34% in October. Source: Federal Reserve
Overall, 77% of adults said they were at least doing well financially in July, up from 72% in early April and 75% in October, according to the survey.
The biggest improvement came from the low-paid - 45% of those earning less than $ 25,000 saw an unexpected $ 400 expense in July, compared with just 34% in October. It did so even though low-income workers were most likely to lose their jobs in the pandemic.
Read More: Here's What You Need To Know About Eligibility for Unemployment Benefit
"This is a real signal that even low- and middle-income households have been able to put some of that money away," said Sahm. "The money works and the money is gone."
"No reason to believe that this will last"
The poll results reflect other measures showing the resilience of Americans' personal finances. Personal income rose while the economy as a whole contracted - again largely driven by government support, most of which has expired.
"That buffer won't last forever, especially if they haven't got back to their jobs," Sahm said. "There are still all these things for the household and they have lost that infusion of extra support."
A man wearing a protective mask uses an ATM while people wearing gloves and a mask get off a bus in the reflection of the bank window amid the coronavirus pandemic on April 17, 2020 in New York City, United States. (Photo by Alexi Rosenfeld / Getty Images)
The CARES bill provided for a one-time stimulus payment of approximately $ 1,200 plus $ 500 per dependent child, most of which was distributed in May. The law also provided for an additional $ 600 weekly unemployment benefit that lasted through July. This was followed by six weeks of $ 300 or $ 400 a week for unemployed Americans, provided through the Lost Wages Assistance program, which has now expired in at least 17 states.
Further relief remains uncertain.
Congressional stimulus negotiations have been in a stalemate for more than a month, and experts said the chances of getting a new deal ahead of the November elections are dwindling. That means the recent gains in Americans' personal finances could also fade.
"Without relief," said Sahm, "there is no reason to believe that the added financial security people are telling us about in July does not make it to believe that it will last."
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Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.
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