Pandemic Takes Toll on Middle Class
This week, we talk about how middle-class families in the U.S. are struggling to keep up with their debt payments during the pandemic.
Welcome to our weekly chat about the environmental and social issues that influence the way we work, spend our money and live our lives. We're your hosts, Maitane Sardon and Dieter Holger. Want to get our newsletter every Wednesday? Hit the subscribe button in the upper right corner and please share with your friends!
Hi Dieter! Debt-laden middle-class families in the U.S. are finding it difficult to keep up with their payments. In the second quarter of 2020, Americans had $14.27 trillion in total household debt, according to the Federal Reserve Bank of New York. In February, the job market was in good shape and median household incomes were increasing, allowing families to manage their debt. But the pandemic has taken a toll on people’s finances.
Exactly. People relied on a steady income flow and their savings to pay back mortgages and cover car and student loans, credit cards and the costs associated with living in expensive cities or raising children. After losing their jobs during the crisis, many have applied for unemployment benefits, but in some cases say these aren’t enough to cover their lost earnings. Those who continue working say they are facing pay cuts, which isn’t helping either.
Although unemployment has fallen from its pandemic peak, it is still quite high. Low-wage earners have been hit especially hard, but experts say the worst is yet to come for white-collar workers.
Yes, data from the Bureau of Labor Statistics shows that in August, around 3.3 million people aged 25 and over with at least a bachelor’s degree were unemployed, more than double than in February, when there were 1.2 million. During the 2007-09 financial crisis, that number peaked at 2.2 million.
This problem could get worse as companies feel the effects of so many months of inactivity and decide to cut more jobs, although some companies have also outlined plans to bring back furloughed employees. American Airlines and United Airlines said in July that they will furlough or lay off thousands of workers from Oct. 1, when federal aid for airlines expires. The CEO and chairman of Salesforce.com Marc Benioff said in a tweet last week that the company will add 4,000 workers over the next six months and 12,000 over the next year.
Anything interesting happening in the investing world, Dieter?
Lately we’ve seen mining and raw-material stocks trading more like once-hot tech stocks. At least that is the trend in the materials sector of the S&P 500 market index, which is up around 5.4% for the month despite a more than 4% decline in the broader index. Some of the companies seeing gains are crop-nutrient maker Mosaic, miner Freeport McMoran and speciality-gas provider Linde.
What am I looking at? The chart above compares the performance over the last three months of three sectors--materials, consumer discretionary and information technology--within the S&P 500 market index, which contains 500 of the largest American companies.
This could be a good sign because gains in materials suggest optimism among investors that the broader economy will recover. More companies are starting to rebuild after the financial fallout from the pandemic, placing orders for materials like lumber, copper and zinc. New manufacturing orders have also been up for the past three months.
We will see how this pans out in the coming months. Another story I’m watching is the resignation of Trevor Milton, the former executive chairman of electric- and hydrogen-powered truck maker Nikola after allegations that he misled investors about the company’s tech. The claims prompted the Justice Department and Securities and Exchange Commission to investigate the company. Nikola denies the allegations, and Milton says he resigned so the firm can focus more on its business.
Companies are hoping tech like Nikola’s becomes more widespread so they can lower their environmental impact. Now let’s open it up to our readers: How has the coronavirus crisis affected your debt repayments?
Share your thoughts below, email us or catch us on Twitter. Your words could appear in our next edition! Have a great week and remember to wash your hands. 👋
Meet the team:
Elevate the Conversation is produced by the editorial teams of The Wall Street Journal and Dow Jones Newswires. Here's a little bit more about us, along with our contact information. We'd love to hear from you.
Dieter Holger, Reporter: I have a knack for uncovering values-based investing trends and I’m obsessed with spreadsheets and charts. I really enjoy ‘80s music, skateboarding and yoga (but I’m bad at both). dieter.holger@wsj.com @dieterholger
Maitane Sardon, Reporter: I have a passion for amplifying the voices of those at the center of stories. I love running on Barcelona’s beaches and binging on chocolate ice-cream to compensate (it’s all about balance). maitane.sardon@wsj.com @sardomaitane
Catherine Lindsay, Editor: I like breaking down complex ideas and explaining them. On the weekend, you’ll find me wandering the city with my film camera at the ready. catherine.lindsay@wsj.com @CathsLindsay
Tammy Lian, Designer: As a visual producer, I'm always excited by the challenge of creative problem solving. In my spare time, you can usually find me taking care of my ever-growing collection of plants and drinking tea. tammy.lian@wsj.com @violian.tammy