How Did the Pandemic Affect Household Balance Sheets?

The question is how the COVID-19 pandemic affected the finances of vulnerable households, as well as those with more resources. On one hand, the shut-down of the economy resulted in salary cuts and job losses. On the other hand, many households received substantial government relief – through stimulus payments and unemployment benefits – and booming housing and equity markets accompanied the rapid economic rebound. Household consumption could also have gone up or down over this topsy turvy period. This brief, which is based on a recent paper, examines how COVID affected the balance sheets of U.S. households, as measured both by subjective self assessments and by objective measures of net wealth.1 It is only a first look at the issue as the period examined goes from December 2019-December 2021. The discussion proceeds as follows. The first section describes the financial support provided by the government during the pandemic. The second section discusses the data and methodology used to measure both the change in perceived well-being and changes in actual net worth. The third section presents the results, which include the reported use and perceived effects of the stimulus payments, as well as an assessment of how all of the relevant economic factors affected actual household balance sheets. The final section concludes that high-wealth households gained an enormous amount from the run-up of housing and equity prices during the period we examine; the stimulus payments and market gains helped boost the balance sheets of middle-wealth households; and the stimulus payments allowed lowwealth households to break even – a stark difference from the Great Recession.