No recovery yet for low- and moderate-income populations

Despite a modest recovery in the overall economy, a new study from the Federal Reserve Bank of Kansas City finds that low- and moderate-income populations continue to face increased hardship in Oklahoma and other states in the Tenth Federal Reserve District.

The FRB of Kansas City conducts a quarterly survey of non-profit and community organizations that serve low- and moderate-income (LMI) populations in the Tenth District.* Respondents are asked about the economic conditions of the clients they serve. The results are used to construct indices measuring the financial condition, service needs, jobs availability, affordable housing, and credit access of LMI populations.  The June report found conditions continuing to worsen for LMI populations in the 2nd quarter of 2011, although in some sectors the gap between the number of respondents reporting things are getting worse and those reporting things getting better is narrowing :

• The Financial Condition Index, which is the broadest measure of the financial health of the LMI population, revealed significant deterioration. The report states that, “Persistent unemployment, diminished credit standing, and rising costs for basic needs were noted as impediments to financial recovery in the LMI community.”
• The Service Needs Index revealed growing demands for services by organizations serving the LMI population. Increased demand was attributed to rising costs for essential items, an exhaustion of financial resources by the long-term unemployed, and a rash of natural disasters, including flooding and tornadoes.
• The Jobs Availability, Affordable Housing, and Credit Access indices all showed slight improvements in the latest report but remain in negative territory. In the employment arena, “District contacts observed that employers in the LMI community have been relying heavily on part-time workers and that pay and hours have been reduced for many.” In the area of affordable housing, impediments included tighter mortgage lending standards and reductions in government funds available to assist LMI families buy homes. Regarding credit, poor credit histories and other obstacles to affordable credit have led to reports of greater borrowing from payday lenders.

In addition to questions about their clients, respondents also reported on the strength of their own organizations, which were aggregated into two additional indices: the Organization Funding Index and the Organization Capacity Index. Most organizations reported a worsening of their financial situation. The report notes:

While many contributors made efforts to maintain their giving during the recession and early recovery, donations have waned as they have struggled to meet other financial obligations. Recent government budget cuts have exacerbated the funding situation.

The survey not only found that the situation of low- and moderate-income clients and organizations had worsened in the past quarter, it also found general pessimism about the direction things were expected to go in the months ahead. In particular, little faith in the economic recovery  and the expectation of persistent federal, state, and local budget cuts are dampening the outlook of those who serve low- and moderate-income populations.

The Federal Reserve Bank of Kansas City was the first of the Fed’s regional banks to conduct a survey specifically exploring conditions for low- and moderate-income populations, a path which several other banks have now followed. Although the results of the survey should be interpreted with caution – the indices are based on responses from some 100 to 150 organizations and are a measure of the perception, rather than the actual prevalence, of hardship – they clearly suggest that the recession to date has been far too weak to lift up those huddled on the bottom rungs of the economic ladder.

* The Tenth Federal Reserve District encompasses Oklahoma, western Missouri, Nebraska, Kansas, Wyoming, Colorado, and northern New Mexico. LMI individuals have incomes below 80 percent of the area median income, which is defined as the metropolitan median income for urban residents and state median income for rural residents