September’s retail report showed that Americans increased spending by 1.9% from August, and paints a picture that the U.S. economy is well supported by consumer spending even in the absence of a second stimulus package.
But a new report by economists at the University of Chicago and JPMorgan Chase Institute casts that picture as an illusion of the U.S. economic outlook, at least in relation to consumer spending by those Americans in desperate need of an income.
Spending levels in August were supported by the $600 weekly enhanced unemployment benefit jobless Americans collected and saved over the course of four months, as well as the one-time $1,200 stimulus checks, the report suggested.
But over the course of that month, two-thirds of the savings they accumulated were exhausted, according to the University of Chicago and JPMorgan Chase Institute. The report looked at 80,000 families’ checking accounts and the credit-card data of people who received unemployment benefits in July and August.
The chances of a passing stimulus package, which would likely include another round of stimulus checks and enhanced unemployment benefits, is becoming increasingly slim as election day nears and Democratic and Republican lawmakers remain at odds, lawmakers said over the weekend.
“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 report states.
Before the $600 unemployment benefit expired in July, jobless Americans were spending 11% more than employed Americans, the researchers found. By August, jobless Americans were spending roughly $590 a week. That’s 1% less than what employed Americans spent.
“The August spending decline among jobless workers shows no signs of having plateaued, suggesting that that in future months, in the absence of additional government support, spending among the unemployed could likely decline below August levels,” the report added.
“Over time, a fall in spending among the unemployed could meaningfully impact aggregate consumption,” the researchers concluded. “Policymakers can support aggregate consumption and financial stability among the unemployed by renewing some form of government support.”