There it was again.

Only six in ten American workers could afford a surprise $400 expense, John Hope Bryant, founder of Operation Hope, an Atlanta-based non-profit, told the Wall Street Journal for a profile that ran today (July 25, 2020)

That $400 figure crops up everywhere like a persistent weed, portraying a large segment of Americans as living perilously on the edge of catastrophe.

“Some 40% of Americans would struggle to come up with $400 for an unexpected expense,” reported CNBC.

“In America right now today, almost half of Americans are a $400 unexpected expense away from complete upheaval,” Sen. Kamala Harris (D-CA) said on April 1, 2020 when announcing plans to introduce a Rent Relief Act.

“The gap between incomes and costs is so gaping that 40% of Americans can’t come up with $400 in an emergency,” Sen. Elizabeth Warren said on May 9, 2019.

Those pushing the $400 story usually cite the Federal Reserve’s report, “Well-Being of U.S. Households in 2018.”   The Report writers interviewed a sample of over 11,000 individuals—with an online survey in October and November 2018.

But the 40% figure is wrong.

People who just skimmed the initial text of the executive summary of the Report or relied on a text message, probably saw this: “Results from the survey show that many adults are financially vulnerable and would have difficulty handling an emergency expense as small as $400.”

If they read the Report itself further, however, they would have seen this: “If faced with an unexpected expense of $400, 61 percent of adults say they would cover it with cash, savings, or a credit card paid off at the next statement—a modest improvement from the prior year. Similar to the prior year, 27 percent would borrow or sell something to pay for the expense, and 12 percent would not be able to cover the expense at all.

So it’s not true, as Warren claimed, that 39% of people “can’t come up with” the money they’d need to handle this situation.

The Federal Reserve report makes clear that, although 4 in 10 adults “would have more difficulty covering such an expense,” many of them would be able to make it work by carrying a credit card balance or borrowing from friends and family.

Parents are often the source of financial help. One in 10 adults received some form of financial support during 2018 from someone living outside of their home. Over one-quarter of young adults received such support and among young adults with incomes under $40,000, nearly 4 in 10 received some support from outside their home.

Only 12% of adults “would be unable to pay the expense by any means,” the Federal Reserve Report concluded.

This doesn’t mean, however, that all is well in the American economy. Although many families reported that they had made substantial gains since the survey started in 2013, persistent disparities remained by race, education, and geography. Also, the report relied on interviews in 2018, well before COVID-19 struck the United States and massive economic dislocation occurred.

All the research done so far is showing that the economic fallout from COVID-19 is hitting lower-income adults harder.

The Pew Research Center has noted that The financial shocks of the outbreak have hit Hispanic and black Americans especially hard. When it comes to public health, black Americans appear to account for a larger share of COVID-19 hospitalizations nationally than their share of the population. One result is that, according to a July 2020 Rand Corp. survey, 40% of non-Hispanic black households and nearly 50% of Hispanic households reported problems paying their bills, compared with 21% of non-Hispanic white households.

We won’t know for quite a while what the public has to say to the Federal Reserve about how things are 2020, but it probably won’t be good.