Nearly 40% of households making under $40k have lost their jobs

The Federal Reserve says nearly 40% of people in households making under $40,000 a year lost their jobs in March, illustrating the damage the COVID-19 crisis has inflicted on low-income families.

Fed Chairman Jerome Powell reported the data point during a webcast on Wednesday morning. The Fed will release more detailed data as part of its Survey of Household Economics and Decisionmaking due for release Thursday.

“The numbers show clearly that it’s more recent hires and lower paid people who are bearing the brunt of this, although people are suffering all across the income spectrum,” Powell said.

He noted the data is “particularly painful” within the context of the longest economic recovery in U.S. history, which came to an abrupt end with the novel coronavirus. Prior to the pandemic, the U.S. unemployment rate touched 50-year lows at 3.5%.

The Fed has been particularly interested on the distributive effects of the COVID-19 crisis. The Federal Reserve Bank of San Francisco reported earlier this month that jobs loss among low-income communities was compounded by concerns over access to critical health resources and meeting basic needs like food and housing.

The report, separate from the forthcoming one cited by Powell, noted that 35% of respondents do not expect their communities to return to normal within a year.

A person wearing a protective face mask as a precaution against the coronavirus walks past stuttered businesses in Philadelphia, Thursday, May 7, 2020. Nearly 3.2 million laid-off workers applied for unemployment benefits last week as the business shutdowns caused by the viral outbreak deepened the worst U.S. economic catastrophe in decades. (AP Photo/Matt Rourke)

Powell said he has been in touch with non-profit and for-profit organizations that have expressed concern over the ability of the economy to quickly bounce back.

“There is a growing sense that the recovery may come more slowly than we would like but it will come,” Powell said.

He expressed specific worry over a widening of the skills gap as the unemployed sit on the sidelines, which could exacerbate the ability of those people to get back to work when the recovery comes. He added that a prolonged recession and a weak recovery would have massive ripple effects on the U.S. economy, raising the stakes for the Fed and fiscal policymakers in Congress and the White House to do more. 

Failure to do so would lead to “lasting damage,” Powell warned. 

“The result could be an extended period of low productivity growth and stagnant incomes,” he said.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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