COVID-19

Household debt up 4% in the first quarter

Justin Ho Jun 12, 2020
Heard on: Marketplace Morning Report
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David McNew/Getty Images
COVID-19

Household debt up 4% in the first quarter

Justin Ho Jun 12, 2020
David McNew/Getty Images
HTML EMBED:
COPY

A new report from the Federal Reserve this week says debt held by households increased by almost 4% in the first quarter. Much of that increase happened before the pandemic started. But what does that say about where we are headed now?

Some people are digging deeper into debt during the pandemic. Greg McBride at Bankrate.com said about 1 in 6 households reports having more debt now than before the crisis.

“And that’s 1 in 4 for those that have suffered some sort of income disruption,” McBride said.

A separate report from the New York Fed says the average debt per capita rose to $52,000 in the first quarter, about 3% more than the year before.

But economist Tim Quinlan at Wells Fargo said the government’s stimulus has caused many people’s incomes to rise, too.

“April, for example, was the best month on record for personal income. That was the month that the stimulus checks got counted,” Quinlan said.

He said savings rates have also gone up, given the restrictions on in-store shopping.

And, some consumer credit has slowed, Warren Kornfeld at Moody’s said.

“It’s down very, very significantly with auto, because auto sales are down,” Kornfeld said.

He said the concern is whether borrowing will start to rise more as the government’s stimulus wears off.

COVID-19 Economy FAQs

Are states ready to roll out COVID-19 vaccines?

Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.

How is the service industry dealing with the return of coronavirus restrictions?

Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.

How are hospitals handling the nationwide surge in COVID-19 cases?

As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.

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