Beyond the Headlines: Deadly Job Losses, Fancier Cars
Personal finance news and research you may have missed
You may have read recently about the delays that millions of people had getting their $600 stimulus payments and how much harder it is to find homes for sale as mortgage rates continue to amaze. You probably know, too, that all that staying home we’re doing triggered the country’s first job losses in eight months in December and that, thank goodness, economists foresee a much more normal economy later this year—after a rough patch this winter—assuming COVID-19 vaccines actually reach the broader population.
But did you know that the stress of lost income from the COVID-19 shock could lead to an additional 1.4 million deaths over the next 20 years or that most people with federal student loans don’t expect to be financially ready to resume payments until at least June?
To reach beyond the biggest headlines, we scoured the latest research, surveys, studies, and commentary to bring you the most interesting and relevant personal finance news.
What We Found
Pandemic Unemployment Could Kill 1.4 Million People
As if the death toll of COVID-19 wasn’t bad enough—more than 383,000 in the U.S. alone— the pandemic’s unemployment shock could kill an additional 890,000 people in this country over the next 15 years, and as many as 1.4 million over the next 20, according to new academic research.
In a non-peer-reviewed working paper published recently by the National Bureau of Economic Research, researchers at Duke University, Johns Hopkins University, and Harvard Medical School examined the links between life expectancy, death rates, and unemployment going back to 1960, and found that the COVID-19 crisis could increase the mortality rate by 3% and reduce life expectancy 0.5% for the overall American population over the next 15 years.
The stress of being out of a job has been linked to higher rates of suicide, cardiovascular disease, and other health problems, the paper said, noting that African-Americans would be hit the hardest by this past year’s unemployment shock.
Students Need an Extension
People with outstanding federal student loans were given a reprieve after the economy took a turn, and not only do most report not feeling prepared to resume making payments, but almost one in five didn’t even realize they were about to start getting bills again.
In a national poll taken Nov. 31-Dec. 4, 77% of over 58,000 borrowers surveyed said they didn’t feel financially secure enough to resume payments until at least June, according to Student Debt Crisis, the advocacy group that conducted the survey. And 18% weren’t aware the suspension of payments was ending. (The reprieve ends on Jan. 31 unless it’s extended again.)
The picture is more bleak for people of color. Some 54% of Black borrowers and 49% of Latinx borrowers anticipated not being able to afford their payments in six months, compared to 43% of white borrowers.
The loans are taking a psychological toll too: 65% of those surveyed reported having increased anxiety, depression, or stress because of their student loan burden during the pandemic.
Strange Financial Advice: Buy Yourself Something Nice
The latest round of $600 stimulus payments is making its way into bank accounts across the U.S., but what happened to the $1,200 checks distributed last spring? Researchers at Texas Tech University and the College for Financial Planning in Colorado wanted to know whether people used the cash to pay for needs, for wants, or if they put it away for the future.
It turns out, according to their July survey of 1,172 people who use Amazon’s Mechanical Turk crowdsourcing marketplace, most people (83%) spent at least some of the money on necessities, 55% spent at least some on wants, and 65% used it to save, invest or pay outstanding debt.
While it’s not all that surprising that the payments were used differently depending on job instability and financial resources, here was one of the more interesting findings: people who consulted financial planners, family, and friends spent more of their check on wants than those who didn’t consult anyone.
Try Telling Atlantic City or Las Vegas Unemployment Is Down to 6.7%
Sure, the country’s headline unemployment has fallen to 6.7% from its April peak of 14.8%, but 18 of the 396 metropolitan areas tracked around the country had double-digit unemployment rates as of November, according to seasonally-adjusted data from the Bureau of Labor Statistics (BLS). The 18 areas, mostly in New Jersey, Texas, and the Western U.S., include Atlantic City, Las Vegas, and Yuma, Arizona. El Centro, California was the worst off, with 16.7% unemployment. (And if you’re curious, Ames, Iowa, had the lowest unemployment rate in the country at just 2.4%.)
While these hard-hit cities are generally better off than they were at their worst point in the unemployment crisis (El Centro had a 30% unemployment rate back in April, for example) the majority have seen a recent uptick in their jobless rate and six dipped below 10% at some point.
Good Times Roll for Car Buyers
You may be hearing a lot about unemployment, but for some, the pandemic doesn’t mean “time to find a new job” but “time to buy a new car,” and a bigger, fancier one at that. Low interest rates on car loans have made new cars all the more appealing. And because more people want larger vehicles with more amenities during the pandemic, for the first time ever, new cars are selling for an average of over $40,000.
In the fourth quarter, the average transaction price of a new car rose to $40,184 from $39,380 in the third quarter, according to automotive data company Edmunds. The average amount financed was $35,373, or $581 a month at an APR of 4.6%.
Divergent Paths: Building Up Savings or Worried Sick
Speaking of buying a more expensive car, the pandemic has only accelerated the financial divisions among Americans, and the results of one survey released this month show just how stark the paradox can be.
Logica Research, which surveyed 1,200 people in October, found that 41% of respondents said they planned to pay down more debt in 2021, while 32% hoped to pay off more credit card bills.
But at the same time, 64% reported being “somewhat” or “very” stressed about their financial situations, 19% ended up short when trying to cover monthly expenses, and 27% said they’re tapping into their savings more now than ever before.