BlackRock Investment Institute

Macro insights

U.S. savings to support spending – for now

Fiscal support – through beefed-up unemployment insurance and direct stimulus checks – has provided a critical bridge for U.S. household incomes through the Covid pandemic. It has helped households build up a buffer of over $1.2 trillion in excess of normal savings. See the chart. This should help sustain consumer spending – at least for now. But there are risks: Negotiations on another round of fiscal support appear to have broken down, perhaps forcing some consumers to eat into their savings. And savings are concentrated in the hands of wealthy households less likely to spend the excess. 

U.S. consumer disposable income and spending, 2017-2020

Sources: BlackRock Investment Institute and U.S. Bureau of Economic Analysis, with data from Haver Analytics, Oct. 2020. Note: The income (orange line) and consumption (yellow line) series are re-indexed to equal 100 in January 2020. Excess savings are defined as monthly saving in excess of average monthly saving in 2019. The $1.2 trillion buffer is the accumulation of excess saving from February-August 2020, expressed in non-annualized terms.

U.S. employment data point to a continued restart in economic activity, with a further fall in the unemployment rate and a slight increase in average hourly earnings. The Covid-19 labor market shock is unlike cyclical recessions; unemployment jumped from 4.4% to 14.7% when activity shut down in April - far more than in past crises. But as activity restarted, unemployment recovered rapidly, even though the pace of improvement has slowed recently.

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