Transcript
Gloria Guzman: Thank you for joining us today for the seventh episode of The Federal Reserve Bank of Atlanta's webinar series, examining our recent actions and continuing response to the COVID-19 pandemic. My name is Gloria Guzman, and I'll be your moderator this morning. We are excited to have Karen Leone de Nie, vice president of our Community and Economic Development department. Karen will share insights from a national Federal Reserve survey of nearly 4,000 organizations that work in low-income communities. She will share information about what is happening in these vulnerable communities, how these organizations are helping, and the need that still remains. We will then transition to our Q&A segment where she will answer some questions that were submitted at registration. Karen, thank you for joining us today. I will turn it over to you now.
Karen Leone de Nie: Great. Gloria, thank you so much for the introduction and for having me on today's webinar, and good morning to everyone who's joining us. Welcome to my living room. I'm going to start with a little bit of background before I jump into the survey and the information that Gloria just talked about. Most people are familiar with the Federal Reserve's, Federal Reserve Bank's role in setting monetary policy and regulating banks, but there are other functions housed in the central bank. And I, for example, direct the community development efforts of the Federal Reserve Bank of Atlanta, or the Atlanta Fed for short.
In this role, our team is tasked with fostering a better understanding of how the macroeconomic policy affects different people. Different people in rural places, in smaller communities, in urban areas, and in particular, how it affects low- and moderate-income people, people who are not earning the median salary and below that. And we're also charged with expanding the availability of credit and financial services to low- and moderate-income people and places. Because we know that consumers and communities are critical participants in the economy, their well-being is essential to the nation's overall economic vitality.
And that's why the Federal Reserve works on these issues. For me at the Atlanta Fed, that means focusing on the six southeastern States—Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The other parts of the country are served by one of the 11 other Federal Reserve banks. And at the start of the COVID-19 crisis, my counterparts and I got together on a phone call and recognized that we were at a really unique moment and that we didn't have a clear picture of how this crisis was going to unfold. But we knew something from past crises and that's that, when there's a financial shock, low- and moderate-income people and places are the first to experience it, and they are often the last to recover from it.
We know that this is often true for the organizations that serve them, and so we wanted to take a look at those particular issues and in these communities. We also knew that national data often overlooks these kind of stories, and so it was important to do an intentional effort at targeting resources to understand the issues. To help to inform that response and recovery roadmap that the nation is building, we needed voices from the front lines and impacted communities, and we needed to understand what the families, places, and organizations that serve them are experiencing. We decided to launch a national survey, and that's what I'm going to talk to you about today. And we wanted to make sure that when we collected this data and information, we made it broadly available both to the local communities working on these issues as well as to local, state, and federal policymakers, both within the Federal Reserve System and within the federal government.
During the first part of the webinar, I'm going to share results from that survey. And then during the second part, Gloria and I are going to have a conversation, and that'll give us a chance to share some stories about the challenges and the promising solutions and strategies that are being executed in the Southeast. Let me start by talking about this survey. It was fielded online between April 8 and April 10, and it resulted in nearly 4,000 responses from across the country. I also want to try to take a moment to give you some depth about the respondents. I often find that surveys feel very sterile, very distant from real life, and so I wanted to be clear that these are real people located in communities just like yours across the country. Nearly half of them work directly with individuals and families and more than ... work in nonprofit organizations.
Some work in urban areas, some work in rural areas, and some work in both. And they largely work on things like providing affordable housing for low-income people, working on job training and assistance and lending to small and micro businesses. And they also do a lot on financial education and financial services. Think of them as your local Habitat for Humanity, United Way, food bank, Goodwill, Salvation Army, Legal Aid, or any of the many small neighborhood organizations. These are the frontline workers.
The first question that we ask them is to see what this, what the disruption was from the COVID-19 on the economic conditions in the communities that they serve. As you can see on the slide on the screen right now, respondents were asked to rate that level of disruption. And as you can see, almost 91 percent said that it was a significant disruption, with 69 percent anticipating that the recovery would be difficult. I suspect you don't find this particularly surprising as the survey was out at a time when states were restricting activities, and many schools have recently switched to online learning or closed entirely. We know that total nonfarm payroll employment fell by 20.5 million in April, putting the unemployment rate at 14.7 percent where just a month before it was 4.4 percent.
Let's move to the next slide. When we asked these respondents what were the top impacts, again—no surprise—income loss topped the list. And it's important to know that it's not just traditional jobs that were lost; the gig economy was heavily impacted by this crisis. And I think one easy example to understand that is Uber. I know that a lot of people were holding either their full-time jobs or making, filling in the gaps with Uber driving, and Uber entirely closed because or shut down largely because of the crisis. This created an inability to service debt and pay bills.
A second important impact was these business impacts. And this ranged from closures to revenue loss to supply chain disruptions. Health concerns also were no surprise to top the list, and importantly, it was not just about treating those who had contacted COVID-19, but also the difficulty in preventing the spread of COVID-19 due to difficulty accessing testing and personal protective equipment. And finally, basic consumer needs continue to be a challenge, including food and housing. The abrupt nature and the scale of this crisis made very basic services very difficult to come by for many people.
Respondents also made sure to point out that this was especially true for vulnerable populations, including people who were homeless, aging, populations that did not have internet access and were unable to access computers and this was in fact exacerbating existing disparities that we see along racial and ethnic lines. Let's move on to the next slide. The last question we asked about communities is how long is it going to take for these communities to recover? And as you can see on this slide, this ranged from less than three months to over a year, and with the largest percentage, as you see here, was 35 percent anticipated that the recovery would last longer than 12 months.
I'm switching now to talk about the organizations that serve these communities. This is the ecosystem that supports individuals and families, especially in times of crisis. This includes nonprofit organizations, local government, and other community-based organizations. These are those frontline workers that are responding to this or any crisis. And as you can see here, 72 percent said that COVID-19 is a significant disruption to the entity they represent, with 41 percent expecting to bounce back quickly after the recovery.
Let's move on to the next slide. What's the nature of this disruption? It's really important to understand where the pain points are for these organizations in order to think about crafting policy and funding solutions that can help steady them during this crisis. First, let's focus on these first two columns, Demand for Services and Ability to Provide Services. If you look at the demand for services, you can see that 66 percent indicated the demand for services had either increased or is anticipated to increase. And at the same time, 55 percent noted that there was a decrease or anticipated decrease in their ability to provide the services.
And the factors for reducing their ability to provide services are varying. As you can see in column three, staffing levels overall were down 23 percent and are expected to decline by another 16 percent. According to telephone interviews that we did with several nonprofits, these staffing reductions came in many forms; they were either layoffs or they were existing staff that had to take on the dual responsibility of their job as well as helping to educate their children who were now doing the remote learning from home. In addition, we heard that many of these organizations found that volunteers were either no longer comfortable providing services or were not allowed to provide services because of the crisis. In addition, we saw that about a quarter have seen expenses rise and more than another quarter anticipate increases.
In part, this can be driven by public health mandate of social distancing practices that make services slow and inefficient [and] more costly as organizations acquire personal protective equipment and alter physical spaces, and sometimes even impossible. At the same time that this was happening, we see that some of the funding sources are either steady or declining. Fees for services have remained relatively steady with 36 percent remarking that there would be no changes at the present time, but philanthropic funds look like they could be in question. Sixteen percent had already experienced a decrease in philanthropic funding, and 22 percent more expected that decrease to continue in the coming months.
Finally, these organizations anticipated that government funds would become available. Thirty-one percent were anticipating these increases, but at the same time, we still see that several have already experienced some decline in funding. Let's move to the next slide. In light of these conditions, we asked respondents, how long could their entity operate in the current environment before exhibiting financial distress? A quarter of these respondents said less than three months, another 26 percent said three to six months. It's easy to do the math and see that over half of these respondents said that between, sometime between June and September, they're going to face financial distress, and it could cause an inability to support the low-income communities that they serve. Financial distress in a sector can make the economic recovery very challenging, but these organizations are the providers of the essential services to do things like help laid-off workers get reemployed, help small businesses retool and access necessary capital, or help families figure out a strategy to catch up on accumulated bills, rent, and mortgage payments that they may be unable to make during the crisis. We can close the slides now, if that's OK.
Given these enormous challenges, we know that recovery won't be easy. Achieving an equitable and inclusive recovery is going to require cross-sector collaboration to formulate and to test new ideas. This means that governments, philanthropic and private sector and direct service providers are going to need to hear and engage in impacted individuals and communities to work on stabilization and recovery. We are going to continue this survey so that we can hear from these frontline workers, and we can hear from these organizations to understand what's happening and where the needs are. We'll be out in the field again in June conducting a similar survey, and we'll be sharing the results soon after that to continue to provide the necessary information to help inform these strategies.
And as the public health crisis unfolds, the Atlanta Fed's Community and Economic Development program remains committed to identifying opportunities to work alongside policy makers, practitioners, funders, and researchers to support a coordinated COVID response. We are able and positioned to conduct research, provide and make useful data to many of our constituents and to share promising practices and build stronger networks across the communities that will be facing this recovery over time. I encourage you to check back and look at our resources online, as well as to reach out to us with additional questions. With this current background, let me turn it back to Gloria so that we can tackle some of your questions.
Guzman: Thank you, Karen. And thank you for you and your team for all the work that you guys do. It's really crucial and important especially in these times. Before I ask the first question, I want to remind everyone that Karen will be answering questions that were submitted at registration. With that, Karen, you mentioned how heavily impacted the low-income communities have been by job losses. What are communities in the Southeast doing to help those who have been laid off? And to help sectors that need the hiring quickly?
Leone de Nie: Gloria, that's an excellent question, and it's one that we are tracking very closely. First, I just want to reference a Brookings report that pointed out that the Southeast economy has concentrations in sectors that were particularly vulnerable during this crisis. And this included tourism, included transportation, and oil and gas. Think your restaurant workers, think about your, think about your hotel workers. And so we know that these are also the same industries where few workers can actually work from home. This idea of remote work wasn't really an option, and they also had very limited access to paid leave.
Across the Southeast, we've experienced a surge in unemployment in our states and please remember that our states include Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. One of the things that we started doing in response to this is to really begin to track our unemployment claims across these states so that we can understand both the industries that are impacted as well as number of people by both race, ethnicity, age, and gender. I would refer folks to the Unemployment Claims Monitor that we talked about in a previous session, a previous webinar, as one of the resources.
I also wanted to share an example that we've been tracking in one of our states. As we know, even though we've had tremendous job losses, we have some sectors that are looking for new employees. There is increased demand in certain sectors and that admittedly, while the new demand does not replace the losses that we're experiencing, there's still a need to fill those positions. And we need an efficient system to do that, we need a matching program. One of the things that we learned during the last recession was that reemployment programs, very speedy reemployment programs, really presented a great opportunity for individuals to not experience those longer-term economic shocks that make it harder to get back into the labor force.
One example that we're tracking is actually the Tennessee Talent Exchange. It's a new initiative to help laid-off workers in Tennessee find jobs in grocery, retail, and logistics industries, the logistics industries right now. It's an effort by the Tennessee Department of Labor and Workforce Development, and it was designed to transition very quickly, workers from one industry into another. They knew that approximately 350 of their current employees in the hospitality sector and that they were going to be seeing a reduction of 30 to 40 percent of that staffing due to COVID-19. One of the things they did was set up this system very rapidly; they expanded the number of people that they were serving, they've improved their processes, and the Tennessee Talent Exchange has been lifted up as a model for other states as one way to help stem the tide of unemployment, people who are continuing to be unemployed and to find new opportunities for them.
Guzman: I think it's great. And I'm sure I'm definitely interested in following up and finding out how that worked. It's great that you are monitoring this. We have another question, and this has to do with the funding, and I know that you touched on this on your talk, but our nonprofits working in low-income communities usually are funded by what? Could you tell us about it, and how has this funding been impacted by COVID?
Leone de Nie: Yeah, I talked a little about funding in one of our earlier slides, but I think it really warrants talking about this a little bit more deeply because we've talked to many of the organizations in the Southeast about some of their experiences. I want to start off by sharing some of the research that was done by the Nonprofit Finance Fund. One of the things that they found is that individual donors, foundations, and corporate donors are some of the biggest funders of nonprofits across the country. And that what we are seeing in the concern that we're hearing across our nonprofits is that there is a concern that these funders may shift all of their attention to some very narrowly related, COVID-related resources or COVID-related responses, I should say.
And therefore, some of the existing funding streams may be decreased because of that. There's also a concern that as we see greater financial market uncertainty, that both individual donors, corporate donors, foundations will be seeing their own financial fragility increase and that they may withdraw from some of their philanthropic and charitable support that they've given in the past, which can create a very significant impact for nonprofits in the future. Additionally, we heard that many nonprofits hold spring fundraisers. It is a time when they hold galas and various types of activities to do the bulk of their fundraising for the year. And due to the timing of this crisis, most of those fundraisers had been canceled.
Finally, I think a last point I would share in this is that we may find that many nonprofit organizations are fine now, that maybe their finances are OK because they can already see their government funds or their foundation funds for this fiscal year. But several of them told us that the concern is really going to be high when they start the next fiscal year and the larger economic implications of this crisis are felt more fully by both governments, philanthropic foundations, as well as corporate and individual donors. I caution that even if the financial stress is not significant right now on some of these nonprofits, it's anticipated to increase as this crisis continues.
Guzman: Thank you, Karen. Has your work shown ways to support economic activity in low-income areas?
Leone de Nie: Yeah, I am willing to specifically answer that question because much of the economic activity in low-income areas is driven by small and micro businesses. They tend to be the cornerstone of activity in some of the lower-income places that we work in as well as some rural areas. And there've been some very promising practices in this regard and some laudable activities that some of the organizations that we work with have been able to accomplish. In Mississippi, there is a community development, financial institution called Hope Enterprise Corporation; they're a mission-based lender that is set up specifically to improve access to credit in low-income communities. They work with nonprofits and local governments across those five states to get the Paycheck Protection Program and the loans that are made available to small businesses from that executed in their states. Hope's partners helped borrowers complete loan applications, and then Hope took them to the [inaudible].
As of a few weeks ago, Hope had underwritten over 900 PPP loans for over $67 million. And most of those loans were for under $20,000, and many of them were to rural borrowers of course. In addition, we talked to in Tennessee, Pathway Lending, which is also a community development financial institution, and they quickly offered emergency loans of $30,000 to $50,000 to their clients. Pathway also extended existing borrowers 90 days of deferral on loan payments and their businesses that have been affected by the health crisis. And while these are really important examples and successes of making credit available to the small businesses that are often the backbone of economic activity in these communities, they fall short in need. We continue to hear that the smallest of businesses, the micro businesses, businesses that are owned by people of color, women-owned businesses, struggled to access credit.
This is not a new problem. This is a historic problem and one that we have worked for a long time to overcome and have not yet. And so these smaller-dollar loans, the ability to execute these kinds of programs, is really promising. And a lot of the folks that we had talked to both in our interviews as well as in the survey said that targeted resources to these types of small businesses is going to be critical to stabilize them in the future as well as to continue the economic activity in the communities they serve.
Guzman: Great. Yeah, we're all built about small business, right? Very important for our economy. Karen, we have about five minutes left. With that in mind, I will ask you our very last question. If you could share with us a couple of important lessons learned from this unprecedented situation, what will they be?
Leone de Nie: We asked a couple of open-ended questions in our survey, and I couldn't make a pretty chart to share those answers because 3,900 people across the country told us about promising practices. And they came in many different types, in many different shades. And what we saw most important, about a quarter of those were really about collaboration, innovation, and agility.
The nature of this crisis, the fact that it hit us so quickly, that it hit us so broadly—it brought together communities all across the country. And I know more clearly about the Southeast, but all across the country, to very quickly and rapidly respond with new collaborations. We heard from restaurants and food suppliers that work together to make sure that their employees continue to just fluidly move from one business to another and can keep a paycheck and keep the economy and the supply chain going. They're the small-scale examples that we've heard. We heard larger-scale examples. For example, in Atlanta, United Way, the community foundation, launched an emergency fund. Over $25 million has been raised as of, I believe last week, those numbers keep increasing; they keep me on my toes to keep checking back, and already they've mobilized $17.3 million to over 320 nonprofits in the Atlanta Metro.
This is just an example here, but that example is being replicated in cities across the country. We also heard many nonprofits told us that their grantors are being flexible. They're allowing them to use programmatic grants for general operating expenses, emergency grants, and reducing some of the reporting burden. The most important thing that we are seeing, I think, is that people are coming together to share information, to share strategies, to share funding resources. And we are showing an agility to deploy a strategy, both whether it's from the federal government, the Federal Reserve System, or the local nonprofits and community leaders, to respond and come together for this crisis. And my hope is that a lot of the lessons that we've learned about how we can be resilient, how we can be responsive, how we can think about new approaches that reduce burdens and reporting and help us elevate real issues will move forward as our recovery begins and we continue in a new environment. I have some hope that there are some good things that we will see manifest itself.
Guzman: Karen, thank you so much. And I think you've described our country in general. I think we are resilient and we will make it, I'm sure of that. Thank you so much. That is all the time we have today, and I would like to thank Karen for participating on behalf of everyone. I would like to thank you for joining us. We will continue to host these webinars and highlight additional actions the Fed has taken to support our communities during these uncertain times.
If you know someone that would find this session valuable, the audio file and a transcript will be archived on our website, frbatlanta.org. I would like to draw your attention to the Text to Join slide. If you're not already a subscriber, you may do so and subscribe to our weekly digest newsletter or the most up-to-date information by texting FRBA to 33777. Our series will resume in August, when Atlanta Fed experts will provide updates on the impact of the Fed's responses and highlight additional actions the Fed has taken to support our communities during this crisis. With that, I will officially bring this session to a close. Thanks for joining us. Take care and stay safe.