Seven months into the worldwide pandemic, Americans are facing empty savings accounts, reduced unemployment benefits and no relief in sight, according to an Oct. 16 (Friday) J.P. Morgan Chase Institute analysis and media reports.
“Eventually, without further government support or significant labor market improvements, jobless workers may exhaust their accumulated savings buffer, leaving them with a choice to further cut spending or fall behind on debt or rent payments,” the researchers wrote.
Between March and July, the increased unemployment combined with payments from the CARES Act gave people a chance to shore up savings. The $300-per-week unemployment supplement and CARES money had a limited run, and some 36 states had used up the funds by Oct. 7, according to the research.
When the employment boost ended in July, people started raiding their savings, and in August alone went through about two-thirds of the reserves they were able to stockpile over the four months, according to the research.
University of Chicago economist Peter Ganong studied the data and told the New York Times that American are surviving on the leftover crumbs from the CARES Act as the country heads into the holiday season and winter weather.
“The choices are to stop spending on regular everyday purchases, or stop making payments like mortgages, student loans, auto loans, credit cards,” Ganong said. “That’s a terrible choice for a family to have to make. It’s a terrible choice for the macroeconomy.”
So far, Congress and the White House have yet to agree on another stimulus package.
Even before COVID-19 hit, there was evidence of income instability brewing among American consumers. Some 23 million Americans already reported that they were living from paycheck to paycheck. A Federal Reserve report showed that roughly 40 percent of consumers would struggle to cover an unexpected expense of $400. The same patterns were reflected in a 2018 PYMNTS study of household finances.