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Slower Decline Reported in Financial Well-Being of Lower Income Households

For immediate release
Contact: Katherine Dibling, E-mail Public Affairs Specialist, (215) 574-4119

The Federal Reserve Bank of Philadelphia’s Community Development Studies and Education Department today released the results of the Fourth Quarter 2011 Community Outlook Survey (COS), which monitors economic factors affecting low- and moderate-income (LMI) households in the region.

The survey asked the 70 participants, whose organizations provide services to LMI households, to evaluate how their clients’ financial conditions had changed from the third quarter of 2011 to the fourth quarter of 2011. The survey also solicited respondents’ expectations about these factors for the first quarter of 2012.

About the Fourth Quarter 2011 Survey Results

“Survey respondents noted a decline in financial factors facing LMI households, but the decline is less than in past surveys. The availability of jobs, as suggested by our index, is somewhat encouraging. But, overall, the survey indicates that there continues to be significant challenges for these households and the organizations that serve them.”

Marty Smith, Community Development Research Advisor, Community Development Studies and Education, Federal Reserve Bank of Philadelphia

Jobs and Affordable Housing

Twenty-three percent of respondents reported an increase in the availability of jobs, while only 20 percent noted a decrease. Thirty-two percent of respondents expect additional jobs to become available to LMI individuals in the first quarter of 2012, compared with only 10 percent who predict a decrease in jobs.

While it appears that the prospects for employment may be improving for LMI households, the availability of affordable housing, financial well-being, and access to credit for those households continued to deteriorate as 2012 approached.

Although a modest 27 percent of service providers reported a decrease in the availability of affordable housing in the fourth quarter, a more substantial percentage of respondents noted a decline in financial well-being and access to credit (43 and 37 percent, respectively). Still, the decline is less than its third quarter level, and respondents remain optimistic that the decline will continue to lessen.

Financial Well-Being and Access to Credit

Ninety-one percent of participants reported that they saw no change or a decrease in the financial well-being of LMI households in the fourth quarter. However, 24 percent expect to see an improvement in the first quarter.

Three percent of the respondents reported that access to credit had increased, while 97 percent reported that it had decreased or stayed the same as in the third quarter 2011.

Nine percent of survey participants expect their clients’ access to credit to grow in the first quarter, while 90 percent expect it to shrink or stay the same.

Demand for Services

Most service providers (74 percent) saw demand for their services increase from the third quarter of 2011, and 25 percent indicated that demand has remained the same. Sixty-four percent expect demand to continue to increase in the first quarter, and 35 percent expect demand to stay the same.

Capacity and Funding

Twenty-two percent reported an increase in their capacity to meet their clients’ needs; 25 percent reported a decrease; and 53 percent said there has been no change in capacity since the third quarter. Twenty-two percent also expect to see an increase in capacity in the first quarter; 26 percent expect a decrease; and 51 percent expect no change.

Thirteen percent indicated that funding had increased; 40 percent reported that funding had decreased; and 47 percent reported no change. Twelve percent of the respondents expect to see an increase in their funding in the first quarter, while 35 percent expect it to decrease. Fifty-three percent expect no change.

Affordable Housing, Employment Will be Prominent Issues in 2012

Respondents were also asked to describe the most prominent issue affecting LMI communities that their organizations will be focusing on in 2012. Roughly one-third of the survey participants who responded to this question pointed to either affordable housing or employment. Participants also suggested solutions. They were in favor of eliminating “not in my back yard” sentiments that often impede the construction of new affordable units, locating additional funding sources, and calling for congressional action. To improve job prospects, respondents suggested opening employment and training centers in LMI neighborhoods, obtaining funds to establish those centers, and implementing training programs with guaranteed job placement programs.

The Federal Reserve Bank of Philadelphia helps formulate and implement monetary policy, supervises banks and bank and savings and loan holding companies, and provides financial services to depository institutions and the federal government. It is one of the 12 regional Reserve Banks that, together with the Board of Governors in Washington, D.C., make up the Federal Reserve System. The Philadelphia Federal Reserve Bank serves eastern Pennsylvania, southern New Jersey, and Delaware.

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