A day after expressing her hope that continuing to keep interest rates low will help draw the long-term jobless back into the labor force, Federal Reserve Chair Janet Yellen, in remarks before a conference in Washington, said she remains concerned that “the large share of American families” remain “extraordinarily vulnerable” to economic catastrophe.
Speaking via prerecorded video, Yellen told the Corporation for Enterprise Development that the inability to accumulate wealth – particularly non-housing wealth – had left many Americans with nothing to fall back on during and after the Great Recession.
The Fed Chair’s remarks further emphasize her apparent concern over the lingering effects of the Great Recession on individuals and families. She has repeatedly sketched out a “no worker left behind” stance when it comes to trying to stimulate the labor market.
“We have come far from the worst moments of the crisis, and the economy continues to improve,” she said. “But the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand.”
Citing Federal Reserve statistics, she noted that tens of millions of families in the U.S. have net worth, including housing, of less than $30,000, and that the illiquid nature of many assets leaves them uniquely exposed to sudden financial crises.
“I surely hope that our nation will not face another crisis anytime soon as severe as the one we recently experienced,” Yellen said. “But for many lower-income families without assets, the definition of a financial crisis is a month or two without a paycheck, or the advent of a sudden illness or some other unexpected expense.”
To illustrate how ill-prepared most families are for a sudden financial shock, Yellen cited the Fed’s recent Survey of Household Economics and Decisionmaking, which found that less than half of American households (48 percent) would be able to handle an emergency expense of as little as $400 without borrowing money or selling belongings. Many would have to default.
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