Middle Class Endures the Pandemic Under a Mountain of Debt
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What is the main topic discussed in this episode?
Here's your Money Briefing for Tuesday, September 22nd. I'm J.R. Whalen for The Wall Street Journal. Six months into the pandemic, more people are starting to feel the economic burn.
Why are middle‑class families feeling economic pain six months into the pandemic?
The job recovery has been slower than expected and government assistance is running out. Now, even some middle class families are struggling to pay their bills.
You have families who are making $100,000 or more a year and the debt they had taken on correlated to that income. It was manageable. But once that income, once those jobs went away, and they were basically relying on government assistance with the unemployment benefits and stimulus help that came through earlier this year, that still wasn't enough, especially for families living in expensive cities or near them.
Our reporter Anna Maria Andriotis will explain how Americans' debt is catching up to them in the pandemic. That's after the break.
At the beginning of the pandemic, shutdowns led to historic unemployment for blue collar workers. But not all white collar workers can work from home. Now six months in, many of those professional jobs and businesses are still on hold, and middle-class families are steeped in debt. Personal finance reporter Anna Maria Andriotis has been talking to some of them, and she joins me now.
How did rising non‑housing consumer debt set up middle‑class households for trouble?
So, Anna Maria, why the delay here? Why didn't middle-class workers feel the brunt of the economic downturn when other groups didn't?
The initial group of people who dealt with layoffs because of the pandemic were primarily focused in the service industry, be it restaurants, hotels, service workers, as well as small business owners. But what's occurred in the months that have followed is that people ranging from lawyers to architects, engineers, people working in the education sector, These are sectors that have also experienced an increase in unemployment, really essentially as a result of companies pulling back on spending or having less of an ability to spend and essentially the recession, the downturn that we are currently in.
And this is a struggle that wealthier middle class families really aren't used to.
I think the starting point here that's important for everybody to be aware of is what has played out with consumer debt over the last 10 years.
What kinds of debt are most responsible for middle‑class financial strain?
So consumer debt has risen significantly, even for those families that have relatively high incomes. So American families making over about $98,000 a year in pre-tax income owed an average of nearly $92,000 of non-housing debt in 2016. This is just for the families carrying this debt. So for these families who were indebted with non-housing debt, things like credit cards and auto loans, personal loans, etc., These families making just over $98,000 a year owed an average of nearly $92,000 of non-housing debt in 2016. And that was up 32% from 2004 adjusted for inflation.
How did temporary relief measures like deferments and stimulus help—and why weren’t they enough?
As the economy was improving and unemployment was falling and incomes were rising, the amount of debt that people were signing up for and owing was also on the rise. And in many cases, the more significant increases occurred with things like student loan debt, auto loan debt, which exceeded the pace at which they were growing, even exceeded over the last few years the pace at which housing debt was growing. Now, all of this was manageable for many people because employment was good.
What real‑world examples illustrate middle‑class households falling behind on bills?
And as long as that remained the case, they were able to pay their bills. But that changed for many families almost overnight because you have families who are making $100,000 or more a year and the debt they had taken on correlated to that income. It was manageable. But once that income, once those jobs went away, and they were basically relying on government assistance with the unemployment benefits and stimulus help that came through earlier this year, that still wasn't enough, especially for families living in expensive cities or near them, to cover their debts and their other bills.
Now, you spoke with some middle-class people about their experience in the pandemic, and it's interesting how in one case, the pandemic's impact on the housing market affected their family.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:15
2
Why are middle‑class families feeling economic pain six months into the pandemic?
0:15–1:27
3
How did rising non‑housing consumer debt set up middle‑class households for trouble?
1:27–2:36
4
What kinds of debt are most responsible for middle‑class financial strain?
2:36–3:22
5
How did temporary relief measures like deferments and stimulus help—and why weren’t they enough?
3:22–3:55
6
What real‑world examples illustrate middle‑class households falling behind on bills?
3:55–5:20
7
What does the job market recovery look like for higher‑earning, college‑educated workers?
5:20–8:30
Speakers
2 identifiedMore from WSJ Your Money Briefing
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