“The economic downturn has not fallen equally on all Americans and those least able to shoulder the burden have been hardest hit.”—Jerome Powell, Federal Reserve Chairman
Roughly seven months have passed since the effects of the coronavirus outbreak began to reverberate through the U.S. economy. The first three months of the outbreak resulted in tens of millions of jobs lost, and the stark reality is that economists expect it will take several years for those losses to be replaced.
While the labor market has shown some signs of recovery this fall, the pace of the recovery has slowed in recent months. Employment gains declined for three consecutive months in the third quarter.
As of September, the economy had recovered just over 11 million of the 23 million jobs lost during the pandemic. The number of workers unemployed for 27 weeks or longer rose by 781,000 in September to 2.4 million. And if that data weren’t concerning enough, the traditional metrics for measuring unemployment fail to capture the fact that a growing number of Americans have ceased looking for work.
Whole sectors of the economy, such as the service and travel industries, have experienced major disruption, and with it, expanding job loss. Some researchers estimate that 40% of jobs eliminated in the first few months of the pandemic may never be replaced.
In March 2020, at the beginning of the pandemic, the federal government passed the CARES Act. This $2.2 trillion legislation provided direct financial relief and also put in place a temporary financial safety net that ranged from eviction and foreclosure protections, utility shut-off moratoriums, expanded unemployment benefits, paid time off programs, and a pause for student loan payments. The additional money and the range of assistance available helped soften the pandemic’s financial blow for many people.
In recent weeks researchers have published the results of two studies examining the results of the COVID-19 pandemic on poverty in America.
One study published by Columbia University, which looked at monthly poverty rates from October 2019 through September 2020, found that the number of families in poverty has been gradually rising since March.
The study indicated that the economic relief provided by the CARES Act prevented 18 million families from going into poverty in March and April. It also found that the number of Americans in poverty has grown by 8 million since May.
Another study published jointly by the University of Chicago and the University of Notre Dame has shown a similar rise in poverty in recent months. Their study utilized data from the Census Bureau’s monthly Current Population Survey to estimate that the number of poor Americans grew by 6 million people in the past three months. These researchers also found a direct relation between poverty rates and the CARES Act.
While the economy is recovering, albeit slowly, many Americans continue to face deep financial hardship. Pew Research Center found in a recent survey that as many one in four adults have had difficulty paying their bills since the outbreak started, with a third dipping into savings or retirement accounts to make ends meet, and roughly one in six people surveyed have borrowed money from family or friends or have obtained food from a food bank.
These experiences are even more prevalent for low-income adults.
Many of the available protections and assistance provided by the CARES Act have either expired already or are set to expire on December 31. Given the current state of the economy, the consequences of this aid expiring will be significant for individuals, families, and businesses.
While negotiations continue in Washington, it appears less likely that any significant economic stimulus will be signed into law soon.
The House and Senate have each advanced differing aid packages in the months since the CARES Act was passed, however, both chambers of Congress have been unable to reconcile their differences. Without action, the economy, and more importantly, the American people will continue to struggle, and the number of people in poverty will continue to increase.