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Olivier Armantier, Leo Goldman, Gizem Koşar, Jessica Lu, Rachel Pomerantz, and Wilbert van der Klaauw
In this post we analyze consumer beliefs about the duration of the economic impact of the pandemic and present new evidence on their expected spending, income, debt delinquency, and employment outcomes, conditional on different scenarios for the future path of the pandemic. We find that between June and August respondents to the New York Fed Survey of Consumer Expectations (SCE) have grown less optimistic about the pandemic’s economic consequences ending in the near future and also about the likelihood of feeling comfortable in crowded places within the next three months. Although labor market expectations of respondents differ considerably across fairly extreme scenarios for the evolution of the COVID pandemic, the difference in other economic outcomes across scenarios appear relatively moderate on average. There is, however, substantial heterogeneity in these economic outcomes and some vulnerable groups (for example, lower income, non-white) appear considerably more exposed to the evolution of the pandemic.
Gizem Koşar, Rachel Pomerantz, and Wilbert van der Klaauw
The New York Fed’s Center for Microeconomic Data released results today from its August 2020 SCE Household Spending Survey and SCE Public Policy Survey. The former provides information on consumers' experiences and expectations regarding household spending, while the latter provides information on consumers' expectations regarding future changes for a wide range of fiscal and social policies and the potential impact of these changes on their households. These data have been collected every four months since December 2014 for the SCE Household Spending Survey and October 2015 for the SCE Public Policy Survey as part of the Survey of Consumer Expectations (SCE).
Today, the majority of retail payments in the United States are digital. Practically all digital payments are tracked, collected, and aggregated by financial institutions, payment providers, and vendors. This trend has accelerated during the COVID-19 pandemic as payments that require physical contact, such as cash, have been discouraged. As cash gradually becomes obsolete, consumers are left with fewer alternatives for making private transactions. In this post, we outline some evidence on the impact of COVID-19 on consumer payment behavior and follow up in the second post in this Liberty Street Economics series with a look at the implications of cash obsolescence for privacy.
Rajashri Chakrabarti, Sebastian Heise, Davide Melcangi, Maxim Pinkovskiy, and Giorgio Topa
In our previous post, we looked at the effects that the reopening of state economies across the United States has had on consumer spending. We found a significant effect of reopening, especially regarding spending in restaurants and bars as well as in the healthcare sector. In this companion post, we focus specifically on small businesses, using two different sources of high-frequency data, and we employ a methodology similar to that of our previous post to study the effects of reopening on small business activity along various dimensions. Our results indicate that, much like for consumer spending, reopenings had positive and significant effects in the short term on small business revenues, the number of active merchants, and the number of employees working in small businesses. It is important to stress that we are not expressing any views in this post on the normative question of whether, when, or how states should loosen or tighten restrictions aimed at controlling the COVID-19 pandemic.
Rajashri Chakrabarti, Andrew Haughwout, Donghoon Lee, William Nober, Joelle Scally, and Wilbert van der Klaauw
In yesterday's post, we studied the expected debt relief from the CARES Act on mortgagors and student debt borrowers. We now turn our attention to the 63 percent of American borrowers who do not have a mortgage or student loan. These borrowers will not directly benefit from the loan forbearance provisions of the CARES Act, although they may be able to receive some types of leniency that many lenders have voluntarily provided. We ask who these borrowers are, by age, geography, race and income, and how does their financial health compare with other borrowers.
Rajashri Chakrabarti, Andrew Haughwout, Donghoon Lee, William Nober, Joelle Scally, and Wilbert van der Klaauw
COVID-19 and associated social distancing measures have had major labor market ramifications, with massive job losses and furloughs. Millions of people have filed jobless claims since mid-March—6.9 million in the week of March 28 alone. These developments will surely lead to financial hardship for millions of Americans, especially those who hold outstanding debts while facing diminishing or disappearing wages. The CARES Act, passed by Congress on April 2, 2020, provided $2.2 trillion in disaster relief to combat the economic impacts of COVID-19. Among other measures, it included mortgage and student debt relief measures to alleviate the cash flow problems of borrowers. In this post, we examine who could benefit most (and by how much) from various debt relief provisions under the CARES Act.
Rajashri Chakrabarti, William Nober, and Maxim Pinkovskiy
Editor’s note: When this post was first published, the columns in the second table were mislabeled; the table has been corrected. (August 19, 9:30 a.m.)
Building upon our earlier Liberty Street Economics post, we continue to analyze the heterogeneity of COVID-19 incidence. We previously found that majority-minority areas, low-income areas, and areas with higher population density were more affected by COVID-19. The objective of this post is to understand any differences in COVID-19 incidence by areas of financial vulnerability. Are areas that are more financially distressed affected by COVID-19 to a greater extent than other areas? If so, this would not only further adversely affect the financial well-being of the individuals in these areas, but also the local economy. This post is the first in a three-part series looking at heterogeneity in the credit market as it pertains to COVID-19 incidence and CARES Act debt relief.
Olivier Armantier, Gizem Koşar, Rachel Pomerantz, and Wilbert van der Klaauw
A growing body of evidence points to large negative economic and health impacts of the COVID-19 pandemic on low-income, Black, and Hispanic Americans (see this LSE post and reports by Pew Research and Harvard). Beyond the consequences of school cancellations and lost social interactions, there exists considerable concern about the long-lasting effects of economic hardship on children. In this post, we assess the extent of the underlying economic and financial strain faced by households with children living at home, using newly collected data from the monthly Survey of Consumer Expectations (SCE).
Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
Total household debt was roughly flat in the second quarter of 2020, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. But, for the first time, the dynamics in household debt balances were driven primarily by a sharp decline in credit card balances, as consumer spending plummeted. In an effort to gain greater clarity, the New York Fed and the Federal Reserve System have acquired monthly updates for the New York Fed Consumer Credit Panel, based on anonymized Equifax credit report data. We’ve been closely watching the data as they roll in, and here we present six key takeaways on the consumer balance sheet in the months since COVID-19 hit.
Paul Goldsmith-Pinkham, Maxim Pinkovskiy, and Jacob Wallace
Editor’s note: When this post was first published, a reference in the penultimate paragraph to the “elderly” was incorrect; the reference has been corrected to the “near-elderly.” (September 17, 2020, 11:10 a.m.)
Consumer financial strain varies enormously across the United States. One pernicious source of financial strain is debt in collections—debt that is more than 120 days past due and that has been sold to a collections agency. In Massachusetts, the average person has less than $100 in collections debt, while in Texas, the average person has more than $300. In this post, we discuss our recent staff report that exploits the fact that virtually all Americans are universally covered by Medicare at 65 to show that health insurance not only improves financial health on average, but also is a major explanation for the heterogeneity in financial strain across the country. We find that Medicare affects different parts of the United States differently and plays a particularly important role in improving financial health in the least advantaged areas.
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.
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