The Trump Economy: One-Third of Middle Class Can’t Afford $400 Surprise Expense, Federal Reserve Board Finds
by Bob Schwartz
Trump wants credit for the current U.S. economy, which he claims to have single-handedly made great. Despite broad and imprecise indicators such as GDP, unemployment rate and the stock market, the truth is that the economy is fragile for many—and not helped by the craziest and most undisciplined economic leadership in modern American history.
Here is one more sign of just how fragile.
One-Third of Middle Class Can’t Afford $400 Surprise Expense, Fed Finds
Many U.S. adults remain in position of ‘financial fragility’ despite ‘marginally’ improved economic security, central banker says
By Lalita Clozel
May 10, 2019
WASHINGTON—One-third of middle-class American adults couldn’t afford a $400 surprise expense, and some 6% also couldn’t manage such a cost even by borrowing money or selling something, a soon-to-publish Federal Reserve survey of household economics is expected to conclude. The middle class was defined as households with between $40,000 and $85,000 in annual income in 2018.
Fed Gov. Lael Brainard said in a speech Friday that the Fed’s 2018 Survey of Household Economics and Decisionmaking, expected to be released later this month, would show that while economic security has been “marginally” improving, many U.S. citizens—both in- and outside the middle class—were still in a position of “financial fragility.”
Americans’ widespread inability to shoulder an emergency expense “is something that is very pronounced in recent years, and we should be taking a hard look at it,” Ms. Brainard said. “It’s still a pretty large percentage of our respondents who find it difficult…to meet what may seem like relatively manageable expenses.”
Financial security is “one important marker of middle-class living standards,” Ms. Brainard added, speaking at a Fed community development conference. “Wealth is a very important source of resilience, allowing households to handle unexpected expenses to manage the usual changes in income over a lifetime.”
Many people in the middle class rely on credit cards to cover unexpected costs, Ms. Brainard said. Nearly 3 in 10 middle-income adults carry a credit-card balance most or all of the time, the Fed governor said. Those households are five times as likely to borrow if faced with a $400 expense as those who never carry a balance, she added.