Financial resilience prevails as Americans stash more cash and rise above pre-COVID financial standing- JPMorgan report
Americans' financial circumstances have been significantly impacted by the pandemic, but households are returning to pre-pandemic spending and saving patterns
A recent report from The Washington Post on US economy based on data released by JPMorgan Chase Institute; despite the challenges posed by inflation, Americans are in a better financial position now compared to before the pandemic. Recent checking and savings account data indicates that bank account balances have risen by nearly 10 to 15% since 2019. However, this surplus of cash that individuals accumulated during the pandemic is rapidly dwindling.
Median account balances have reached their lowest levels in about three years, dropping as much as 41% from their peak in April 2021 when Americans received government stimulus money and tax returns.
This data, based on an analysis of 9 million Chase customers' bank accounts by the JPMorgan Chase Institute, sheds light on how consumers have managed to sustain spending despite inflation and rising borrowing costs.
A Tentative Outlook
While Americans still have more money in their bank accounts than pre-pandemic, they remain cautious about their economic prospects. Higher prices in essential areas like food, housing, and travel have contributed to a sense of uncertainty. Many individuals have been depleting their savings and foresee challenges in rebuilding their account balances.
The inflation experienced during the pandemic has intensified concerns among individuals. Chris Wheat, president of the JPMorgan Chase Institute, explains that despite the unprecedented federal response that injected money into people's bank accounts, the memory of having a larger balance remains. The feeling of having less has intensified due to inflation.
The Resilient U.S. Economy
Surprisingly, the U.S. economy has defied expectations, avoiding a recession predicted by many economists. This can be attributed to consumers' ability to continue spending, supported by a robust labor market. Despite inflation and rising borrowing costs, households and businesses have sustained healthy spending, helping lift economic growth.
Consumer sentiment has seen a marked improvement, with Americans feeling more optimistic about the economy. After a year of concerns about inflation and criticisms of the Biden administration's handling of the economy, consumer sentiment reached its highest level in more than a year and a half, according to the University of Michigan's metric.
Post-Pandemic Financial Patterns
The past three years, including the global pandemic, government stimulus, and rising inflation, have significantly impacted Americans' financial circumstances. However, researchers suggest that households are returning to pre-pandemic spending and saving patterns. Balances in bank accounts are following a familiar trajectory of increasing and then declining.
While patterns hold across income groups and races, substantial inequities persist. Black and Hispanic households experienced greater gains in savings during the pandemic, thanks to government stimulus, but those gains have since been depleted at a faster rate compared to White and Asian households. This has widened the racial wealth gap, emphasizing the need for equitable economic measures.
Economists warn that racial and income disparities may worsen if the economy falters. The recent increase in the Black unemployment rate, despite overall joblessness decreasing, and reduced working hours in low-paying service jobs are signs of potential challenges ahead. It is crucial to address these issues to ensure a more inclusive and stable economy for all Americans.