2020’s ‘upside down’ recession

Aid, forbearance mean some households are weathering pandemic

For months, Americans have barely dined at restaurants or traveled for vacation. There have been no ballgames or concerts to attend. Gym and other memberships mostly remain frozen.

Forced into lockdown mode by the coronavirus, people put big purchases on hold and scaled back their spending. Around the same time, mortgage lenders, student loan collectors and other creditors offered struggling borrowers a break on payments. And stimulus checks from the government arrived.

These trends have come together to form an unlikely silver lining to theeconomic recession, which set in eight months ago: Despite the pandemic’s economic devastation, which has tipped millions of people into unemployment, many American households are in relatively good shape.

Since April, consumer savings have increased, credit scores are have surged to a record high and household debt has dropped. The billions of dollars that banks set aside at the start of the crisis to cover anticipated losses on loans to customers have been largely untouched. And lending at pawnshops and payday lenders, where business tends to boom during downturns, has been unexpectedly slow.

“Everything was upside down,” said John Hecht, an analyst at the investment bank Jefferies. Usually, in times of distress and unemployment, more people find themselves with deteriorating credit and are forced to seek high-interest, or subprime, loans, Hecht said, but not this year.

The pain may still be coming. Banks and other consumer lenders are bracing for financial stress next year, as millions of people remain out of work and the labor market’s rebound shows signs of stalling. A third surge of coronavirus cases has taken hold in the United States, and lawmakers in Washington are mired in fights about the terms of additional stimulus aid is stalled.

The number of people in America living in poverty has grown by 8 million since May — though their

financial woes often aren’t captured by credit and loan data because they’re out of the financial mainstream.

And longer- term consequences like wage stagnation, reduced entrepreneurship and the

accumulated cost of interest-bearing debt could linger for decades.

But for now, households are weathering the turmoil largely because of the unusual nature of the current downturn. The

pandemic ended America’s longest economic expansion on record, meaning that people came into this recession in better shape than theywere in when the Great Recession took root in2008.

Back then, risky mort-

gages metastasized into a crisis that upended the banking industry; this time, banks and borrowers aren’t facing that kind of structural threat.

DESIREERIOS/THENEWYORKTIMES Customers eat outside a restaurant inNewYork, Sept. 30. Forced into lockdownmodeby the pandemic andworried about their futures as the economic recession set in, people scaled back their spending.