Americans have collectively saved trillions of dollars since the pandemic began. But they don’t really feel cash-strapped – and now there are signs that the pandemic savings boom may be coming to an end.
Savings skyrocket during the first year of the pandemic when the federal government distributed hundreds of billions of dollars in unemployment benefits, economic impact payments, and other forms of aid, and as households spent less more for vacations, concerts and other live activities. The savings rate – the portion of after-tax income that is invested or saved rather than spent – peaked at 33% in April 2020 and continued to rise until the end of last year.
But the savings rate fell in the second half of 2021, almost back to pre-pandemic levels of about 7% last fall. In January, Americans saved just 6.4 percent of their after-tax income, the lowest monthly savings rate since 2013, when millions of employees lost hours to the latest and greatest coronavirus wave. This government did not intervene to provide aid.
However, by some estimates, Americans as a whole have about $2.7 trillion in “excess savings” since the pandemic began, by some estimates.
In a survey conducted this month for The New York Times by online research firm Momentivehowever, only 16% of respondents said they had more savings than before the pandemic and 50% said they had less. Among lower-income households, only 9% said they had more savings and 64% said they had less.
The government measures the total savings of all households, which can be skewed by a few rich people. And it uses a broader definition of “savings” than most people do – for example, paying down debt is considered “saving” in official government statistics.
But those factors cannot fully explain the disconnection. Based on anonymous bank records As reviewed by researchers at the JPMorgan Chase Institute, for example, average checking account balances are still significantly higher than their pre-pandemic levels at the end of December, although they have declined since their peak. last spring. And while the average high-income household has more money in the account, low-income households have seen their savings skyrocket as a percentage.
“We still see this picture that cash balances in general are still growing and they are rising even higher for low-income families,” said Fiona Greig, co-chair of the institute.
Dr Greig said it is possible the balance has shrunk further since December, when the monthly child tax credit payments have ended. Brianna Richardson, a research scientist at Momentive, said it’s also possible that survey respondents miscalculated how much money they had before the pandemic, perhaps because their savings had increased so much earlier in the year. crisis. Inflation can also affect people’s judgment, because the same amount of savings won’t go far when prices go up.
https://www.nytimes.com/2022/02/25/business/economy/economy-savings-rate.html The savings boom may be over, and many people feel short of cash.