Household Pulse: Balances through March 2023
Introduction
Following the unprecedented economic impact and significant fiscal policy response prompted by the COVID-19 pandemic, soaring inflation continues to impact consumer finances.1 This release of the Household Pulse leverages de-identified administrative banking data to examine the path of household cash balances from January 2020 through March 2023 for roughly 9 million Chase customers.2 In addition to comparing cash balance trends across the income distribution, we also show balances by race and ethnicity for the first time in this series. Moreover, we attempt to further quantify and address three key considerations outlined in previous Pulse reports to put our measures of cash balances into perspective with other household finance metrics.
First, our previous cash balance metric only included checking account balances. We now incorporate both checking and savings accounts. Second, we previously calculated balance growth rates based on nominal dollars, a fact that became particularly noteworthy given recent high rates of inflation. In this release we deflate nominal values using Consumer Price Index (CPI) data to report real cash balances. See “Data Box: Our updated cash balance metric” for further discussion on these two considerations.
Finally, previous Pulse reports did not explicitly account for expected upward trends of liquid balances over time. Historically, we observe 3 Quantifying the typical magnitude of such trends can put post-pandemic balance elevations into context. To better understand how recent balance changes compare to pre-pandemic periods, we now reference several comparative samples in our analysis to examine balance growth during earlier periods.
Data Box: Our updated cash balance metric For this release, we update our cash balance metric to include total balances across a household’s full set of JPMorgan Chase checking and savings accounts. Asset allocations for different groups of households exhibit significant heterogeneity.4 Households that hold a larger share of their financial wealth in checking accounts—primarily lower-income households—may have maintained a larger proportion of their balance increases from government intervention in their checking accounts, and the share of those increases held in checking accounts may vary over time. In contrast, households that distribute their liquid assets across a broader range of accounts may not keep much excess cash in their checking accounts. Thus, casting a broader net with our cash balance metric may allow us to see a larger proportion of such households’ liquid assets.5 We also compute real cash balances in this release by deflating nominal cash balances by the Consumer Price Index (CPI), with January 2019 as our reference point.6 We interpolate the monthly inflation values to produce a week-specific deflator, which we apply to report adjusted weekly medians in January 2019 dollars. These real balances can allow for greater comparability of balances over time, by providing a measure of the purchasing power of a specific dollar balance after accounting for the CPI at that point in time. That said, it is important to note that this methodology does not account for behavioral changes that households may make in response to high inflation, such as reductions in spending. The cash buffer metric used in Household Cash Buffer Management from the Great Recession through COVID-19 does account for reductions in spending, and accordingly provides a complementary view on the recent evolution of household liquidity. Refer to Appendix Figures A1 and A2 for comparisons of the above cash balance metrics. |
Reprinted from JP Morgan，the copyright all reserved by the original author.
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