ABA Banking Journal
No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
SUBSCRIBE
ABA Banking Journal
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
No Result
View All Result
No Result
View All Result
ADVERTISEMENT
Home Economy

Households Will Be Key to Economic Recovery from COVID-19

May 11, 2020
Reading Time: 4 mins read
Coronavirus Response: Common Practices for Community Banks

By Tyler Mondres

Consumption has long been the engine of economic growth. As such, consumer health will be key to limiting the depth and length of the COVID-19 recession. Consumers were generally well positioned prior to the health crisis, with historically low debt relative to disposable income. Social distancing, however, has affected US households unevenly. Those employed in industries that require people to gather in large groups or interact closely in person have been hardest hit, while those in industries designated “critical” and those with the ability to telework have been less affected.

Widespread layoffs, furloughs hit the country

Total nonfarm payroll employment fell by 21.2 million in March and April—wiping out all job gains recorded since the Great Recession—and more than 33 million people have filed for unemployment insurance in the last seven weeks. Widespread layoffs and furloughs have hit the transportation, entertainment, retail, and leisure and hospitality sectors the hardest. In fact, more than half of respondents to a recent LendEDU survey said their employment was affected by COVID-19. Those most affected earn less, on average, than others. While they make up a little more than a fifth of the total labor force, they account for only 12.2 percent of total wage earnings.

Households begin to tap savings, emergency funds

These workers have begun to dip into savings and emergency funds to cover expenses. Nearly two-thirds (63 percent) are worried about their bank accounts drying up—88 percent among those who recently lost jobs—and 39 percent of those with credit cards expect to take on more debt than desired to stay afloat. The Federal Reserve’s Survey of Consumer Expectations shows substantial deterioration in households’ financial and economic expectations. For March, there was a 17.3 percentage point rise in the number of households who expect to be worse off financially next year.

The Economic Impact Payments included in the CARES Act helped many workers. One survey found that 57 percent of respondents plan to use the money to pay off debt, pay rent or mortgage, or buy necessities like food or supplies. A survey conducted in late March by SimplyWise, though, found that 63 percent of households will need another EIP within three months and 15 percent will need one in just two weeks.

Divergent outcomes by industry, firm size

Those with the ability to telework—accountants, analysts, managers, etc.—have been less affected by COVID-19 shutdowns. Among LendEDU respondents, three out of 10 said they plan to put their CARES Act payment into savings accounts or emergency funds.

There is risk of further divergence in wages by industry and business size. Smaller firms have been most affected, while large firms, with professional and flexible staff and work arrangements, have been better able to hold off on layoffs and wage cuts. This could lead to a gap in worker outcomes. Professional jobs at large firms could experience a faster bounce-back, while small businesses require several years to recover to pre-coronavirus levels. Thousands of firms are likely to fail in this downturn, keeping unemployment high for an extended period.

The Small Business Administration’s Paycheck Protection Program is reducing financial stress for many small businesses by providing for SBA-guaranteed funding to retain workers. This will likely reduce layoffs and increase the survival rate of small businesses. Nonetheless, staffing is likely to remain cautious and only enough to meet PPP requirements. The PPP exhausted its first round of funding and it remains to be seen if the second round is enough to help all the small businesses in need .

The unknown shape of the recovery

Economists struggle with the question of what recovery will look like when the economy reopens. Whatever shape recovery takes, household health will be key. Consumption, the engine of economic growth, has collapsed amid social distancing measures. Retail sales plunged 8.7 percent from February to March—the steepest decline on record—and were down 6.2 percent from March 2019.

If the pandemic can be controlled within the next few months and the nation can reopen, trillions of stimulus dollars may support a rebound. When a large number of firms re-open, we can expect an initial surge in activity as consumers may go on spending binges to satisfy pent up demand. After the initial surge, a synchronous recovery will be needed to build momentum for growth.

ADVERTISEMENT
Tags: ABA Data BankCoronavirusEconomic impact paymentsEmployment situationSBA Paycheck Protection ProgramSurvey of Consumer ExpectationsSurveys
ShareTweetPin

Author

Tyler Mondres

Tyler Mondres

Tyler Mondres is senior director of economic research at ABA and a frequent contributor on economic and fintech topics to the ABA Banking Journal.

Related Posts

FDIC, OCC tighten policy considerations for bank merger applications

Report: Bank merger activity continues at steady pace

Community Banking
June 18, 2025

While there was a temporary stall in bank merger activity in early 2025 because of the economic fallout of tariffs and other Trump administration policies, overall quarterly deal announcements have held steady, according to a new analysis by...

FOMC minutes: Persistent inflation clouds path forward

FOMC once again holds rates steady

Economy
June 18, 2025

The Federal Open Market Committee announced that it will hold the target range for the federal funds rate at 4.25%-4.5%.

Housing starts rise in August

Housing starts dip in May

Economy
June 18, 2025

Privately-owned housing units authorized by building permits in May increased to a seasonally adjusted annual rate of 1.393 million, according to the U.S. Department of Commerce.

Business inventories rise in February

Business inventories flat in April

Economy
June 17, 2025

Business inventories in April came in at $2.66 trillion, virtually unchanged from the month prior and up 2.2% from a year ago, the Commerce Department said.

Industrial production rose in March

Industrial production fell in May

Economy
June 17, 2025

Industrial production decreased 0.2% in May from the previous month, the Federal Reserve reported.

Home builder confidence unchanged in April

Home builder confidence declines in June

Economy
June 17, 2025

Builder confidence in the market for single-family homes in June was 32, down from 34 the previous month, according to the NAHB/Wells Fargo Housing Market Index.

NEWSBYTES

Treasury official outlines principles for Bank Secrecy Act modernization

June 18, 2025

Report: Bank merger activity continues at steady pace

June 18, 2025

CFPB proposes ending using civil penalty funds for consumer education, financial literacy

June 18, 2025

SPONSORED CONTENT

AI Compliance and Regulation: What Financial Institutions Need to Know

Unlocking Deposit Growth: How Financial Institutions Can Activate Data for Precision Cross-Sell

June 1, 2025
Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

April 25, 2025
Outsourcing: Getting to Go/No-Go

Outsourcing: Getting to Go/No-Go

April 5, 2025
Six Payments Trends Driving the Future of Transactions

Six Payments Trends Driving the Future of Transactions

March 15, 2025

PODCASTS

Podcast: Staying close to clients amid tariff-driven volatility

June 18, 2025

Podcast: Old National’s Jim Ryan on the things that really matter

June 12, 2025

Podcast: What bankers need to know about ‘First Amendment audits’

June 5, 2025
ADVERTISEMENT

American Bankers Association
1333 New Hampshire Ave NW
Washington, DC 20036
1-800-BANKERS (800-226-5377)
www.aba.com
About ABA
Privacy Policy
Contact ABA

ABA Banking Journal
About ABA Banking Journal
Media Kit
Advertising
Subscribe

© 2025 American Bankers Association. All rights reserved.

No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive

© 2025 American Bankers Association. All rights reserved.