Economists from the University of Chicago and JPMorgan Chase studied banking data from about 80,000 families who hold credit card and bank accounts with Chase and received unemployment benefits through August. They determined that once the additional $600 in unemployment benefits expired at the end of July, workers ended up spending about two-thirds of what they had saved in the previous four months.
The researchers also note that almost 11 million workers are relying on their savings with no idea if or when they will receive additional relief, and that could cause them to cut off spending even further than they already have or fail to make their rent or debt payments.
“It very much seems from the data that this is kind of a fall in progress,” said Fiona Greig, the director of consumer research at the JPMorgan Chase Institute.
She added that the $2.2 trillion relief act that Congress passed in March provided the extra $600 per week, which researchers found helped boost spending last April by 22% when compared to the same time last year, implying that those benefits were helping to prop up the economy as well as protect Americans from financial difficulties. Those families cut back their spending by 14% once that additional $600 per week expired and started dipping into the money they had saved before.
“Eventually, if they continue even at the August level, they will continue to draw down that savings buffer,” Greig said.
The study’s co-author, Peter Ganong of the University of Chicago, added, “The economy right now is essentially running — or not running — on the exhaust fumes of the CARES Act.”
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