Recent evidence from the Federal Reserve’s Survey of Household Economics and Decisionmaking (SHED) shows that disparities in income variability, hardship, and savings are deepening Black and Hispanic individuals’ vulnerability to economic insecurity. The Fed Board has conducted this survey annually since 2013, with a focus on capturing how households identify and assess the U.S. economy, their own economic wellbeing, and the potential risks that may impact their finances. The findings published earlier this year reflect the results of questions fielded in the last quarter of 2024, before the economic chaos wrought by the Trump-Vance administration increased fears of a recession.

An economic slowdown in 2025 is no longer just a potentiality. The economic mismanagement of the current administration—characterized by an erratic trade policy, mass federal layoffs and deportations, and an absolute lack of policy predictability—slowed the pace at which the economy and job market grew in the first half of the year. The large downward revision in payroll employment for May and June, for example, serves as a clear signal of a dimming labor market. With mounting evidence of a slowdown, workers of color and their families stand to yet again see their economic disadvantages compound. This is evident when we examine data pointing to Black and Hispanic families’ diminishing capacity to absorb a job loss or a broader economic downturn. 

Lack of dependable income leaves Black and Hispanic adults less financially secure and more exposed to hardship

Less than two in three Black (64.9%) and Hispanic (63.2%) adults reported “doing okay financially or living comfortably” near the end of last year (see Figure A). The financial standing of Black and Hispanic adults has moved in different directions since 2021. In 2021, both groups reported higher levels of financial well-being than in the preceding years. As is well-known, this was largely attributed to the economic relief measures that followed the pandemic with income, unemployment, and housing support. As these support systems quickly expired, Black adults managed to maintain some of their financial gains, largely as a result of the strong labor market recovery from the pandemic recession. But Hispanics didn’t report faring as well. In 2021, for example, the share of Hispanic adults who had reported “doing okay financially or living comfortably” was more than 7 percentage points higher than last year.

Despite varying trends between Black and Hispanic adults, disparities between these groups and their non-Hispanic white peers have not narrowed since 2019. In 2024, for example, more than three in four (77%) white adults reported being in good financial standing. White adults also reported having less income variability than their Black and Hispanic peers. More than a third of Black (33.81%) and Hispanic (36%) adults reported having income that varies at least occasionally from month to month, compared with about one in four (26.45%) of their white peers. These disparate outcomes also follow broader disparities we observe in the labor market, as Black and Hispanic workers remained more likely than their white peers to be employed part time for economic reasons in 2024.

Black and Hispanic adults who report inconsistent monthly income at least occasionally are also significantly more likely than their peers to struggle to pay their bills. In 2024, more than two in five Black (43.27%) and Hispanic (46.30%) adults reported having difficulties paying their bills due to monthly fluctuations in income, compared with less than one in three (31.48%) of their white peers. These racial disparities have existed since before the shock of the pandemic. The disproportionate exposure of Black and Hispanic adults to financial hardship given short-term income fluctuations in the face of a strong economy means that these individuals and their families are vulnerable to even more hardship as economic growth and employment wane in 2025.

Economic insecurity leaves Black and Hispanic adults without enough savings to absorb the shock of an economic downturn or life emergency

The Federal Reserve’s SHED typically asks survey respondents about their access to a “rainy day” fund consisting of sufficient savings to cover three months of living expenses in the event of a job loss or an emergency. This question is typically used to assess the financial resilience and economic security of respondents. In 2024, only slightly more than two in five Black (41.43%) and Hispanic (44.14%) adults reported having enough savings to absorb the shock of a job loss (see Figure B). In contrast, three in five non-Hispanic white adults reported having sufficient savings to cover three months of expenses. The financial resilience of Black and Hispanic adults has not changed dramatically since 2019.

The disproportionate fragility that Black and Hispanic adults face in the event of an emergency is even more severe than the access to a rainy day fund may suggest. This is evident when we consider the ability of these individuals to cover an unexpected $400 expense with cash, savings, or a credit card that they are able to pay back in full by the next statement. While 71% of non-Hispanic white adults were able to cover a $400 emergency with cash or its equivalent last year, less than half of their Black and Hispanic peers reported having this financial cushion (see Figure C). While the share of Black and Hispanic adults who could cover a $400 emergency “with cash or its equivalent” has fallen since 2021, their relative disadvantage has endured since 2019. Despite a growing economy last year with low unemployment and rising wages, these individuals and their families stood one unplanned expense away from deepening economic uncertainty and pain.  

A weakening labor market will hurt all, but communities of color will once again bear the brunt of the impact    

Recessions have historically been especially harmful to communities of color. In each business cycle downturn over the course of the last four decades, Black and Hispanic workers have experienced a significantly larger fall in employment than their white peers. When the employment situation of these workers of color deteriorates as a result of a contraction, it also takes them longer to recover than their white peers. This can lead to painful scarring effects that disadvantage workers already more likely to suffer joblessness than their white peers even when the economy is growing and inflation is tamed.