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The US authorities’ response to the Covid-19 crisis was to provide substantial financial assistance to US households. Health restrictions also prevented some spending. The combined effect of these measures was the accumulation of excess household savings.
The end of the subsidies and the return of inflation could have raised fears that this excess savings would be used up quickly, particularly by less wealthy households. One way to study this issue is to look at the financial accounts by income quintile published by the Federal Reserve. We exclude real estate, which is difficult to mobilize, and concentrate on net financial wealth measured by financial wealth minus debt. For all households, this net financial wealth was on average 32% higher in the first quarter of 2022 than in 2019.
Government aid has prevented a deterioration in the financial situation of the lowest income households. Given that the latter were the most affected by the job cuts linked to the health measures, this aid has therefore fully played its role.
On the other hand, the categories of people with annual incomes of more than 26,000 dollars, i.e. 80% of the population, saw their net financial wealth increase by at least 20% compared to 2019. A more detailed analysis shows that for members of the second decile, 62% of this improvement is due to an increase in liquid assets. For the highest income quintiles, the share declines but remains significant. In total, US households have $5 trillion in additional bank deposits compared to in 2019, or nearly 20% of the GDP. This is an important resilience factor for US growth.
The opinion expressed above is dated July 1st, 2022 and is subject to change.
See also: https://lazardfreresgestion-tribune.fr/en/germany-job-vacancies-continue-to-rise-in-may/
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