The Covid Economy

Many Americans are struggling financially amid the pandemic, but some are finding ways to thrive

ReOpen NC protesters demonstrate for pressure North Carolina Governor Roy Cooper to reopen the State amid the coronavirus (COVID-19) pandemic in Raleigh, NC, United States on May 12, 2020.
Anadolu Agency | Anadolu Agency | Getty Images

Welcome to the Covid Economy, CNBC Make It's deep dive into how the coronavirus pandemic is impacting all areas of our lives, from food to housing, health care to small business. We're focusing on North Carolina, a swing state that has seen rapid economic growth — and growing inequality — since the last recession to learn how residents are weathering the economic consequences of this once-in-a-lifetime health crisis.

You might think the deck is stacked against Andi Gibbs. A 25-year-old nursing assistant at a hospital system in North Carolina, Gibbs is a young, Black woman working in a caregiving profession — she has nearly all the characteristics of the people who have been hit hardest by the pandemic. 

In North Carolina, Gibbs' home state, women made up nearly 60% of all unemployment insurance claims in April, according to a report from the North Carolina Justice Center. The state's unemployment rate for Black workers passed 16% during the second quarter, compared to just 12% among White workers.  

And yet, against these headwinds, Raleigh-based Gibbs is thriving. She changed career paths last year, moving from working in the airline industry to a career in health care. Gibbs got a new job in March — right as the pandemic was ramping up in the U.S. 

"I definitely feel a little bit of survivor's guilt because before I worked in health care, I was actually a flight attendant. And a lot of my friends who were flight attendants got furloughed this past year," Gibbs tells CNBC Make It. 

Andi Gibbs, 25, made the career switch from flight attendant to nursing assistant over the past year.
Source: Andi Gibbs

Even with the stress of the pandemic on the health-care system, Gibbs says the move has been good for her. 

"I was kind of thrown right into it with Covid," Gibbs says. She typically works 50 hours a week earning just over $17 an hour as a floating employee, which means she travels to different hospitals within the system and different units. 

"My position basically runs the gamut," Gibbs says. One day she'll work in pediatrics, the next in an ICU step-down unit. Another day, she'll do a shift in the emergency department working with Covid-19 patients. 

"When I started working during Covid — this is back when all the health-care heroes and everything was going on — it felt really cool," Gibbs says. But recently morale has started to slide. "We've been dealing with [Covid] for quite a few months, so it's draining for us. You can definitely see that a lot of us are a little bit burnt out."

Yet Gibbs remains undaunted. Along with work, she spends her time taking prerequisite classes online through a local college so that she can strengthen her application to programs to become a physician's assistant. Right now, she's taking an anatomy and physiology class, spending about an hour and a half after work each day studying and logging online for lectures. 

Like so many Americans, Gibbs has still had to make some tough choices over the past year. In order to save money so she can return to school, as well as pay for the extra classes now, she moved back in with her parents for about five months. In total, forgoing a rent payment and living at home allowed her to bank about $3,500 in savings. 

"To be honest, I definitely see that as a privilege. Not everyone has that opportunity, and I definitely did," Gibbs says. Yet even with that privilege, she says she still feels like she still needs to be grinding to make it work. 

Savings rates are up, but so is poverty and debt

Gibbs isn't alone in increasing her savings. U.S. savings account balances grew an average of 65%, or $1,553, during the pandemic. As of August, nearly 60% of Americans had saved enough to cover at least three months of living expenses. That's up seven percentage points from last year, according to the Financial Health Network's U.S. Financial Health Pulse 2020 Trends Report.

In April, personal savings rates among U.S. households — the percentage of monthly income they're saving — hit a record 33.6%, according to data from the U.S. Bureau of Economic Analysis. That's up from just 7.5% in April 2019. While the rate has fallen since the peak of the pandemic, it's still at 14% as of August. 

Americans' overall increased ability to save, paired with stimulus and relief actions taken by lawmakers through legislation like the CARES Act, has actually helped the country's overall poverty rates. The average poverty rate fell from 10.9% in January and February to 9.4% in April, May and June, according to an academic study published by the National Bureau of Economic Research.

The report's authors, economists Jeehoon Han, Bruce D. Meyer and James X. Sullivan, credit the government's enhanced unemployment benefits and stimulus payments for the decrease, arguing that poverty would have risen 2.5 percentage points without these actions. 

Yet while researchers at the Center on Poverty and Social Policy at Columbia University agree that the CARES Act did mitigate poverty in the U.S. early in the pandemic, their ongoing analysis finds that the monthly poverty rate has now increased. Their calculations, which span into September, show that the monthly poverty rate in the U.S. increased from 15% in February to 16.7% in September. That's after taking into account the effects of the CARES Act. 

"We find that at the peak of the crisis (April 2020), the CARES Act successfully blunted a rise in poverty; however, it was not able to stop an increase in deep poverty," the researchers note. The study defined deep poverty as those who have monthly incomes lower than half the federal poverty guidelines

In other words, there wasn't an immediate financial crisis because many people put aside some of the extra money that they had garnered through the federal stimulus actions. But now that there does not appear to be any additional stimulus on the horizon, there's going to be stress on people's finances, says Jennifer Tescher, president and CEO of the Financial Health Network.

"I don't think what I would call a savings blip is going to be the thing that carries people through the rest of this pandemic," Tescher says.

Early data points around debt are starting to bear this out. Prior to the pandemic, the average American had about $66,600 in debt, according to data Credit Sesame provided to CNBC Make It. That includes all types of debt, including mortgages, credit card balances, and auto, student and personal loans. In North Carolina, the average resident's debt was slightly less, sitting at $59,386 in January, according to Credit Sesame. 

As of October, the average state resident now has $67,180 in debt. Nationally, Americans have an average of $74,237, according to Credit Sesame. 

What a 'K-shaped recovery' means

This ongoing divide between Americans who are struggling with the financial fallout from the pandemic and those who have actually benefited from stay-at-home orders is widening, especially as federal relief programs expire. 

"This pandemic and the economic effects of it are really a tale of two Americas," Tescher says. "If you didn't lose your job, if you have money in the stock market, life's pretty good for you. But if you lost your job or you lost hours, if you had to take time off of work to help school your children, if you already were living paycheck to paycheck, this is a very challenging time and particularly now that stimulus has run out."

As part of the CARES Act, Congress set up a new federal program that paid out an extra $600 a week on top of state unemployment benefits. But the program expired at the end of July. In August, President Donald Trump signed an executive order that provided a temporary $300 weekly federal unemployment boost, but that too has lapsed.

Meanwhile, lawmakers have been unable to come to an agreement to extend the benefits or provide another round of stimulus payments of up to $1,200 to buoy Americans experiencing financial hardship and kickstart the U.S. economy.  

The increasingly diverse outcomes for individuals have led economists and financial experts to theorize that even if Congress passes additional relief measures, the U.S. will undergo a "K-shaped recovery." 

"The K-shape reflects the idea that some people are doing better and some people are doing worse, just to oversimplify," says economist Diane Lim. "The economy has separated the people that have done very well during the pandemic and the people who have done badly. It's almost been a downward spiral for people that have lost their work."

In some cases, it's been a "double whammy," Lim says, particularly for younger workers, women and people of color, because a higher portion of these populations worked for low wages in industries like hospitality and retail that proved vulnerable to the pandemic. 

"It's a K-shaped recovery because all the sectors of the economy that were most affected by the stay-at-home orders definitely cannot come back full speed," Lim says. 

Restaurants, for example, are still not operating at full capacity in most of the country, and there's no predicting when they'll be able to return to pre-pandemic levels. Even if there's a viable vaccine, Lim says we may see that Americans have gotten used to eating at home more often, which may affect both restaurants and employees long-term.

That means even though some like Gibbs have not been hit financially by the pandemic, more relief is needed for those who were. In the short-term, that includes pushing through additional stimulus payments, re-starting enhanced unemployment benefits, keeping eviction moratoriums in place and continuing to offer mortgage forbearance and payment deferral programs, Tescher says.

"It's a combination of government work and also support from lenders, from landlords, from employers — everyone has to pitch in here to ensure people can weather these next several months," she says.

How to move forward without leaving people behind

Policymakers, companies and individuals also need to focus on longer-term solutions like education, says Greg Brown, a professor of finance at University of North Carolina's Kenan Institute of Private Enterprise. So far, the pandemic has had a bigger impact on those with lower incomes and less education, Brown says. Education will be "critically important" going forward, but Brown cautions that workers need to be equipped with the right skill set.

"We need people to know how to code. We need people to work in certain health-care sectors, where there's technical expertise that's required on day one," Brown says. "If you look at the data, people who have technical skills just have much higher wages."

Now may be the time for the government and private companies to consider investing in education and programs that can re-skill workers, Brown says. In fact, Gibbs' plan to go for a master's degree in a physician's assistant program is a smart move. 

"We do have this slack in the labor market right now, and it does make sense to think about how we take advantage of that," Brown says, adding that providing education grants to people for certain industries may be a way to bolster higher-quality employment in the future. "We don't have to run the risk of saddling people with a bunch of debt for a degree that isn't particularly valuable," he says. 

While Gibbs says she anticipates she will have to take out student loans to finance her degree, she's trying to keep her tuition and fees low by applying to in-state schools. "I'm just trying to get into the best school possible for the lowest possible tuition," she says. 

In the meantime, she's doubling down on the marketable skills she can add to her toolbelt to maintain her employment. "I'm always trying to pick up a new skill or a new thing I can do because even though I work in health care, I still feel like my employability is at stake," Gibbs says. In addition to trying to get into a graduate program, she regularly practices her Spanish to keep her language skills up-to-date, too. 

"These days you really have to think with your head on straight," she says. "Because if anything, seeing the way the government has responded [to the pandemic] and the lack of funds, programs and a Social Security safety net, it's unfortunately made me discover that if I get myself into a hole, there's going to be no one to dig me out."

CNBC Make It will be publishing more stories in this series each week in October. If you're interested in sharing your experiences related to the pandemic, please email senior reporter Megan Leonhardt at megan.leonhardt@nbcuni.com.

More in this series: 

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