new results

How did the expiration of the $600 unemployment supplement affect spending and saving?

Tldr: the $600 life preserver is deflating quickly

New work w @FionaGreigDC @Farrell_Diana @Dan_M_Sullivan @pascaljnoel @JoeVavra @maxliebeskind

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This thread summarizes the results and you can find more details here https://cpb-us-w2.wpmucdn.com/voices.uchicago.edu/dist/1/801/files/2018/08/Institute-UI-Benefits-Boost-Policy-Brief.pdf

In the spring, the US Congress orchestrated the largest ever expansion of weekly unemployment benefits via a $600 per week supplement to the unemployed. This supplement expired at the end of July.

What happened to spending and savings in August in #JPMCInstitute data?

Fact 1: Spending of unemployed workers fell by 14 percent from July to August. Because the level of spending of the unemployed was quite high when the supplement was available, the spending of the unemployed in August is similar to their level of spending pre-pandemic.

Our prior research has only looked at the *spending* of UI recipients.

I want to thank @MarthaGimbel, @AmirSufi, @SimonMongey for pushing us to look at *savings* as well.

Martha in particular asked us back in August “I want to know when savings from the $600 will run out”.

Fact 2: Unemployed workers roughly doubled their liquid savings over the summer, and then drew down two-thirds of those accumulated savings in August alone.

This finding is related to a broader theme in the macroeconomy noted by Emi Nakamura: money saved during the worst of the pandemic may help fuel the recovery. https://www.bloomberg.com/news/articles/2020-10-06/star-economist-says-pandemic-savings-buildup-may-boost-recovery

Emi’s conjecture helps to explain what happened in August. Unemployed households didn’t have to cut spending much because they had accumulated savings. This is, perhaps, a microcosm of what is happening for employed households as well.

The savings of the employed also rose, although it is hard to see because the unemployed rose so much more. (Further, savings usually fall from March through December as people spend down their tax refunds, so savings for the employed are up even more on a year-over-year basis.)

What will happen now? Workers who remain unemployed are likely to exhaust their savings buffer from the $600 (assuming no further legislative action). When savings are exhausted, workers will cut spending further or fall behind on other financial obligations such as debt and rent

This excellent article by @emilymbadger and @qdbui describes the terrible choices individual workers are making now:
* having trouble paying for school supplies
* considering early retirement
* deciding whether to pay rent https://www.nytimes.com/2020/10/16/upshot/jobless-workers-built-up-some-savings-then-the-600-checks-stopped.html

Why do we only have data for August at this point? The data are lagged by 4 weeks and then in this case it took a few weeks to analyze the data. We will continue to release results through the fall. Hopefully we will eventually write a paper about it too.

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