A pedestrian wearing a protective mask carries a Converse Inc. shopping bag while waiting to cross a street in the Soho neighborhood of New York, on Thursday, Aug. 6, 2020.
Nina Westervelt | Bloomberg | Getty Images
Americans are saving more than ever during the pandemic, and Morgan Stanley says it may be enough to temporarily keep the economy on track after stimulus talks stalled in Washington.
Morgan Stanley estimates that U.S. households have saved an extra $1.1 trillion as of August, compared to pre-pandemic levels. The boost in funds can, in part, be attributed to the CARES Act, the $2.2 trillion relief package passed by Congress in March, which included $1,200 checks to qualifying individuals and an additional $600 per week for those receiving unemployment benefits through the end of July of this year.
Lockdown measures in the initial months of the pandemic also prevented people from spending. Morgan Stanley says the “savings buffer” that many U.S. households have accumulated “should provide an additional cushion for consumer spending in the coming months.”
To be sure, payments from the government, such as unemployment benefits, still make up an elevated portion of disposable income, which may point to trouble for consumers as that aid runs out. Government transfer payments peaked at nearly 35% of total personal disposable income earlier this year, after passage of the CARES Act, but still remain higher than levels reached during the Global Financial Crisis at 24%.
While the U.S. unemployment rate fell to 7.9% in September, its lowest level since March, it remains above pre-pandemic levels.
Federal Reserve Chairman Jerome Powell called on Congress to pass additional stimulus on Tuesday in remarks to the National Association for Business Economics, saying that “while the combined effects of fiscal and monetary policy have aided the solid recovery of the labor market so far, there is still a long way to go.”
In a tweet on Tuesday afternoon, President Trump called off further stimulus negotiations until after the U.S. election on November 3, but later tweeted, “If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY..”