JP Morgan Chase's new global think tank is working with policy makers and economists in an attempt to tap into big data insights to better understand how changes in individual financial behaviors affect the economy as a whole, reported Financial Times Wednesday (May 20).
The bank launched the tank earlier this week - the JPMorgan Chase Institute - which will, going forward, look to combine analytics insight with info gathered from 30 million or so customers.
The initial report takes a closer look at the income and spending habits of 2.5 million JPMC account holders between 2012 and 2014 in the hopes of getting a guide on how income fluctuations broadly influence consumer spending choices. As many suspected, the report indicates that may U.S. households do not have sufficient funds saved to handle both a large expense and a loss of income simultaneously. Moreover it found that $4,800 was the magic "buffer" number most middle-income families would need to sustain them through an unexpected series of unfortunate events, even though the median household only holds about $3,000 in assets that could be tapped.
The facet of the report most widely classified as "surprising" highlights the volatility of spending habits and income on both sides of the financial spectrum.
Those earning less than $35,300 were most likely to see the biggest swings— with near double-digit jumps in their monthly income 25 percent of the time and equally large drops another 25 percent of the time, Financial Times reported.
Top earners - with income over $100,000 - however, saw the widest swings.
“How exposed are individuals to income and consumption volatility over time? Do earning and spending patterns differ across the income spectrum? How much of a financial buffer do households need to weather their exposure to volatility?” said Diana Farrell, the woman who was brought in to head the institute from Mckinsey’s centre for government, according to Financial Times. “With this kind of analysis, the institute will be able to answer the questions to help policy makers make more informed decisions.”
There are holes in this data, JPMC noted, particularly among low earners, who are disproportionately likely to be underbanked or entirely unbanked.