Last weekend’s tornado outbreak in the middle of the country is a prime example of sudden unemployment. Several areas were devastated by a powerful tornado that destroyed scores of businesses, and with them, jobs.
“It’s a severe problem here because the tornado wiped out so many businesses in the downtown area and those people are out of business, at least for a while, and most of their employees as of last Friday night are unemployed,” said Chuck Foster, an attorney in Mayfield, Ky., the hardest-hit city.
The tornado completely destroyed Foster’s law firm building, but the firm’s employees are fortunate. The law firm quickly occupied space in nearby Paducah and is still operating.
“We have an insurance policy through Allstate that will help us keep operating, but Allstate requires a lot of paperwork and reviews of our business, so it’s not clear when we might get paid,” Foster told ConsumerAffairs.
Assistance can take time
People across the region who are now jobless because of the storm can file for unemployment benefits, but that process can take a while as well. Millions of dollars in government and private aid will soon flow to the region, but decisions will have to be made on how to distribute the funds – something that won’t happen overnight.
That’s why personal finance experts recommend every household have an emergency savings account to meet unexpected circumstances. Navy Federal Credit Union recommends an emergency fund of at least $11,000 for the average household, but most people are not close to that goal.
The median emergency fund balance among workers today is $5,000, according to the 21st Annual Transamerica Retirement Survey published in September. Older workers had the most in savings, while younger workers had the least. The Federal Reserve has found that most people wouldn’t be able to pay for an unexpected $400 car repair.
Even high earners live paycheck to paycheck
Not only do consumers lack an emergency fund, but many live paycheck to paycheck. A recent survey by PYMNTs.com found that 53% of households earning between $50,000 and $100,000 a year have no money left by the time the next payday rolls around. That can be a big problem if you suddenly find yourself without a job.
The U.S. Bureau of Labor Statistics reports that from January 2017, through December 2019, there were 2.7 million workers displaced from jobs they had held for at least 3 years. The COVID-19 pandemic greatly increased that number.
Labor Department statistics show that 2,458,419 people are drawing unemployment benefits, an increase of 510,808 from the previous week.