Spending

How the coronavirus has changed the way Americans earn, spend, and save, in 10 charts

The pandemic recession has been like no other.

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Kiersten Schmidt/Grow

Do you remember what you were doing one year ago? Maybe you were walking the dog when you found out that the NBA had suspended its season after a Utah Jazz player tested positive for the coronavirus. Or perhaps you were watching the Netflix phenomenon "Tiger King" when you got the notification that Tom Hanks and Rita Wilson had tested positive in Australia.

For many Americans, March 11, 2020, was the day Covid-19 went from mild concern to major disruptor. It was the day the World Health Organization declared the outbreak a global pandemic.

Americans had to adapt the way they lived, worked, and communicated. People had to spend more time in their homes, which led many to either flee to the suburbs or modify their existing spaces to serve as coffee shops, gyms, and offices. They canceled vacations, moved to other states, and replaced in-person social gatherings with Zoom hangouts.

Meanwhile, unemployment numbers hit a record high. The stock market crashed and then soared, resulting in the shortest bear market in history.

One year later, it looks like America could at last be nearing the end of the pandemic. The vaccine rollout is ramping up and some experts predict the economy could be "on fire" by the fall.

The charts below illustrate some of the ways the pandemic changed the way Americans earned, spent and saved money this year.

The pandemic spawned a new kind of recession

The U.S. officially entered a recession last summer after posting two straight quarters of negative GDP growth. But it seemed as though as soon as the recession became official, the country was on its way out of it. The S&P 500 set a new record high August 18, making the shortest bear market in history official, and the unemployment rate fell from a high of 14.8% in April to 7.8% by September.

While recessions are typically difficult for low-income earners, the pandemic recession has disproportionately affected this group, as the greatest share of jobs lost has been in the typically low-paying leisure and hospitality sector. The employment rate for workers making less than $27,000 per year fell 37.1%, compared to a drop of just 12.4% for those making more than $60,000.

By the summer, the employment rate for high-income earners had bounced back to where it was before the pandemic, leading Harvard economics professor Raj Chetty to tell then-candidates Joe Biden and Kamala Harris in August that "the recession has essentially ended for high-income individuals." Employment for high-earners has since remained relatively steady. Meanwhile, the employment rate for those making less than $60,000 is still well below where it was last January.

The diverging fortunes of the lower and upper classes has led to this being called a "K-shaped" recession and recovery

This is also reflected in how people reported feeling about their finances compared to one year earlier, in a recent survey from the Pew Research Center. Nearly one-third (31%) of lower-income adults surveyed said their financial situation is worse than it was a year ago, compared to just 11% of upper-income individuals.

Share of the following groups who said that compared with one year ago, their financial situation is now...
Note: Based on a survey of 10,334 U.S. adults in January 2021. Middle income is defined as two-thirds to double the median annual family income, while lower income falls below that range and upper income falls above it.
kiersten schmidt/grow Pew Research Center

In past recessions, the stock market has reflected the struggling economy. During this recession, the stock market became almost completely uncoupled from the job market. This means that many higher-income people, who are far more likely to own stocks, have actually seen their wealth increase.

In the chart below, you can see how the relationship between the stock market and the unemployment rate changed last spring. Prior to the pandemic, the unemployment rate and the stock market generally moved in lockstep, with the S&P 500 decreasing as unemployment increased. Then, last April, unemployment skyrocketed as stocks started recovering.

S&P 500 vs. unemployment rate, Sept. 2006 through Feb. 2021
kiersten schmidt/grow YCharts

Millennials, many of whom are living through the second recession of their adulthood, report feeling the biggest financial impact from the coronavirus recession. This generation, the oldest of whom are turning 40 this year, are feeling the crunch right around the time when they'd typically buy homes, have children, and move up the corporate ladder.

As a result, millennials are having a harder time reaching these milestones. They own homes at rates lower than previous generations did at the same age and they cite their inability to afford a down payment as the biggest barrier to buying a home.

Share of the following groups who said that they saw an impact from the pandemic
Note: Based on a survey of 4,000 U.S. adults in September 2020.
kiersten schmidt/grow Morning Consult

Moving homes and otherwise staying put

When the pandemic officially began in March 2020, experts predicted the housing market would slow to a crawl. Moving at all seemed like an unnecessary risk, and open houses were temporarily banned in many states. Instead, the opposite happened. Spurred by record-low mortgage rates and a desire for bigger homes, housing prices began to soar in early summer, rising almost 10% from January 2020 to 2021. Meanwhile, rent in the 10 most expensive metro areas fell 2.5% as people sought more space in cheaper areas.

The divergence between rental and home prices is another unusual aspect of this recession. "I can't think of a time when anything like this has happened," Jeff Tucker, the senior economist at Zillow, told The Atlantic. "This is unprecedented."

Change in median price
Note: Expensive metros represents an average of the 10 areas with the highest median rent in January 2020.
kiersten schmidt/grow Zillow

At the same time, Americans were vacationing much less. The CDC recommended people avoid discretionary travel, and in August, almost half of Americans (49%) said they had canceled a trip due to Covid-19. Airport traffic fell roughly 90% last summer, and data from the Bureau of Transportation shows that many people opted for trips closer to home.

Change in number of trips from one year earlier
kiersten schmidt/grow Bureau of Transportation Statistics

Over the past year, travel spending decreased from an average of $55 to $26 per week.

Average weekly travel spending, compared with a year earlier
Note: Data is based on a proprietary panel that covers more than a million people across the U.S.
kiersten schmidt/grow Status Money

Spending less, saving more

The uneven recession is apparent again when looking at how people spent — or didn't spend — money last year. All income groups started spending much less when stay-at-home orders began last March amid uncertainty about the economy, then gradually spent more over the course of the year as the economic outlook improved.

Low-income earners got a big boost to their budgets when they received stimulus checks and increased their spending in the weeks that followed.

Change in consumer spending since January 2020 by income
kiersten schmidt/grow Opportunity Insights

The relative stability of middle- and high-income jobs, along with the distribution of stimulus checks and fewer options for spending on travel and social activities, meant many people were actually better off financially over the past year, as the Pew survey found. After seeing how the pandemic shocked the economy last spring, many people used this opportunity to build up an emergency savings account.

The personal savings rate, or the percentage of income that Americans put into savings, hit a historic high of 33% in April, suggesting that many people chose to put at least some of their first stimulus check toward their savings.

Personal Saving Rate
Note: Data is seasonsally adjusted.
kiersten schmidt/grow U.S. Bureau of Economic Analysis via FRED

Along with shoring up their savings, many people tackled another financial priority by paying down their debt. After increasing by an average of $54.2 billion per year over the previous 10 years, total credit card debt fell by a record $82.9 billion in 2020, according to WalletHub.

Credit card debt, change from one year earlier
kiersten schmidt/grow WalletHub

While the past year has been difficult for many, Year Two of the pandemic is looking better. With vaccines rolling out and a fully reopened economy on the horizon, some experts predict employment will return nearly to pre-pandemic levels by the end of the year.

By then, it will be clearer which of the economic trends that emerged during the pandemic are here to stay.

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