Professor Cohen: Despite Pandemic, Cumulative ‘Household Financial Distress’ Isn’t Particularly Bad

Asian senior couple stressed and serious counting with calculator and having money problem

If you watch the evening news, with long lines at food banks and homes destroyed by weather-related disasters, you might think the vast majority of Americans are in a financial spiral.

That doesn’t appear to be the case, according to new research by finance and real estate professor Jeffrey Cohen. He and four colleagues studied ‘household financial distress’ and found that the current recession caused by the pandemic isn’t as dire as some previous financial crises.

“We’re not saying that people aren’t facing excruciating distress, many are. But, overall, it is not as high as it was even eight or 10 months ago,” said Cohen, who has been a visiting scholar for 20 years at the Federal Reserve of St. Louis, which prepared the report.

Cohen and his colleagues looked at employment and income statistics, the rate of delinquent mortgage, auto loans, and other measures of financial health, and developed an index for assessment.

The ultimate goal is to produce economic data that helps policymakers make strong, fact-based decisions about policies that could include income support, extended unemployment insurance, low interest rates, relief from foreclosure, and other measures.

In the recent downturn, household financial distress spiked during the early months of the pandemic but eased considerably over the latter half of 2020.

“I was a little surprised that the household financial stress had gone down, but that is probably because of government stimulus packages, student debt deferment and mortgage forbearance, so people aren’t becoming delinquent,” he said. “The question is: Is this masking true distress that is going to come forward eventually? Are we eliminating financial distress or merely postponing it?”

The researchers will next study subsets of the population to determine, for instance, if minority groups or residents of certain parts of the country are experiencing more distress than the overall population.

“I think from the broader level it is very helpful for people to see how government policies and stimulus packages impact consumers,” Cohen said. “In future economic downturns we can rely on that information to minimize the distress people are facing. We will keep updating this information every quarter to reflect what’s going on over time.”

To read more of Cohen’s research, please visit: