U.S. households and businesses facing unequal recovery, Fed report finds


Businesses and households improved their balance sheets with government assistance late last year, but some consumers and the smallest businesses continued to struggle, according to a report released Thursday by the Federal Reserve highlighting the unevenness of the economic recovery.

"The vulnerabilities in both corporate and household debt have decreased," said the Fed in its semi-annual financial stability report. "Nevertheless, many companies and households are still heavily burdened." Continue reading

Overall, household cash stacks and deposits doubled from around $ 1.6 trillion to around $ 3 trillion in the second half of 2020. Most household lending has also been focused on borrowers with high credit scores, the Fed said.

In the business area, short-term arrears “have decreased significantly since last summer” and long-term arrears “have decreased, indicating an improvement in corporate balance sheets,” the report said.

However, the totals masked some of the ongoing challenges faced by households with lower credit scores and the smallest businesses.

The pandemic-related job losses were heavily focused on consumers who were already "financially vulnerable, including many low-wage workers and racial and ethnic minorities," the Fed said.

There were also differences in the credit card details. Default rates were unchanged for borrowers with stronger credit, but increased slightly in December for borrowers with subprime credit scores.

There was some good news about small businesses - fewer reported needing financial assistance as more pandemic-related restrictions are being lifted.

However, some of the smallest companies are still not clear. Many of the funding sources used by small and medium-sized businesses, including loans from banks, investors and private loan funds, have tightened over the past year, "potentially making these smaller businesses more vulnerable to shocks," the Fed said.

Our standards: The Thomson Reuters Trust Principles.


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https://businessservicesnews.ca/u-s-households-and-businesses-facing-unequal-recovery-fed-report-finds/

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