Most Americans are significantly better off financially now than they were before the pandemic began, according to new bank account data, but there are signs that low-income families are starting to fall behind .
After surprisingly strong retail sales, consumer expectations and hiring figures, new data on the economies through December 2021 from the JPMorgan Chase Institute points to an economy rapidly unfreezing, an economy that could turn to the Higher gear as the omicron-fueled COVID-19 wave subsides and declares to continue easing some COVID restrictions.
Americans are sitting on $2.6 trillion in additional savings, according to a separate Post analysis, and signs abound that they are opening their wallets to long-delayed spending on travel, dining and other experiences that have been suspended since lockdowns swept the country nearly two years ago.
High incomes will drive much of this overall spending, said JPMC Institute co-chair Fiona Greig. They have on average nearly $1,300 more in their bank accounts than before the pandemic began, according to the institute’s analysis of anonymized data from the bank accounts of 7.5 million families. Family retirement accounts and home equity have also soared.
For low-income families, the picture is mixed. They saw the largest proportional increase, as their balances rose by around 70% from 2019 levels. $288, unlike high earners, whose balances continued to grow.
“High seventy percent seems very high, but in terms of dollar value, that’s not a ton of money,” Greig said.
But for now, even low-income households still have substantial savings from their stimulus and unemployment checks, the data shows, and a widely-watched survey points to the sunniest consumer outlook dating back to 2013.
Indeed, across the income spectrum, expectations for revenue and expense growth are at record highs, and the average likelihood of a missed loan payment is near record lows, said Gizem Kosar. , an economist with the New York Fed’s Consumer Expectations Survey team.
To be sure, a spending spree could throw more fuel on an already hot economy and worsen the country’s biggest inflation spurt in four decades. The conflict in Ukraine is already threatening to drive up fuel prices and increasing the risk of cyberattacks that could once again rumble through supply chains, said Diane Swonk, chief economist at Grant Thornton. If these disruptions coincide with a rush in food, travel and automobile spending, policymakers could find themselves facing a situation not seen since the 1970s.
Yet there is potential for a substantial spending boom. Despite soaring inflation and multiple waves of COVID-19, crisis-era stimulus measures that added an estimated $1.7 trillion to U.S. incomes left many families on strong financial position at the end of 2021.
U.S. savings peaked in late March after $1,400 checks from the U.S. bailout hit bank accounts across the country. A typical family’s account plummeted by $700 to $900 in the months that followed, still leaving most families at least $500 ahead of pre-crisis levels.
In percentage terms, however, high-income families are down less than 10% from their peak stimulus, while low-income families are down nearly 30% and have lagged further behind in recent years. month. And research shows that inflation has hit low-income families much harder than their high-income counterparts.
Rent inflation, in particular, “completely erodes the purchasing power of the extra few hundred dollars that households may have in their bank accounts,” said Camelia Kuhnen, an economist at the University of North Carolina. This financial crunch is making it harder to pay bills, even though bank balances look healthy.
“I wish things were different, and I wish I could say that low-income families these days are less financially fragile than they were before COVID, but the reality is that they’re worse off,” said Kuhnen.
This helps explain why the share of households expecting to be “a little” or “a lot” better off in the coming year has fallen to its lowest level on record, according to Fed data from New York. York.
The share of households behind on their bills remains exceptionally low, according to a separate report from the New York Fed, but as the federal stimulus dries up and lending comes out of forbearance, some households will consider a financial landscape different.
“Circumstances change. There is no sign that there will be another round of stimulus,” said Greig of the JPMC Institute, adding that the expanded child tax credit payments have ended and the child tax credit payments have ended. student loans are expected to resume in May.
Data from the JPMC Institute also showed that families who received monthly child tax credit payments fared significantly better financially in the second half of 2021 than families who did not. The last wave of payments under the expanded program was disbursed in mid-December.
To complicate matters further, inflation means savings will not go as far as they used to. Prices have risen 8.9% since the start of the pandemic. But so far, rising prices have not deterred consumers.
Consumer-focused companies ranging from Starbucks to Lyft are bracing for what they say will be a massive increase in spending. “There is pent-up demand for Starbucks and for people who want and yearn to get back to their normal routines,” John Culver, the coffee chain’s chief operating officer, said in a recent earnings call.