🚨new results🚨

How did the expiration of the $600 unemployment supplement affect spending and saving?

Tldr: the $600 life preserver is deflating quickly

New work w @FionaGreigDC @Farrell_Diana @Dan_M_Sullivan @pascaljnoel @JoeVavra @maxliebeskind

This thread summarizes the results and you can find more details here cpb-us-w2.wpmucdn.com/voices.uchicag…
In the spring, the US Congress orchestrated the largest ever expansion of weekly unemployment benefits via a $600 per week supplement to the unemployed. This supplement expired at the end of July.

What happened to spending and savings in August in #JPMCInstitute data?
Fact 1: Spending of unemployed workers fell by 14 percent from July to August. Because the level of spending of the unemployed was quite high when the supplement was available, the spending of the unemployed in August is similar to their level of spending pre-pandemic.
Our prior research has only looked at the *spending* of UI recipients.

I want to thank @MarthaGimbel, @AmirSufi, @SimonMongey for pushing us to look at *savings* as well.

Martha in particular asked us back in August “I want to know when savings from the $600 will run out”.
Fact 2: Unemployed workers roughly doubled their liquid savings over the summer, and then drew down two-thirds of those accumulated savings in August alone.
This finding is related to a broader theme in the macroeconomy noted by Emi Nakamura: money saved during the worst of the pandemic may help fuel the recovery.

Emi’s conjecture helps to explain what happened in August. Unemployed households didn’t have to cut spending much because they had accumulated savings. This is, perhaps, a microcosm of what is happening for employed households as well.
The savings of the employed also rose, although it is hard to see because the unemployed rose so much more. (Further, savings usually fall from March through December as people spend down their tax refunds, so savings for the employed are up even more on a year-over-year basis.)
What will happen now? Workers who remain unemployed are likely to exhaust their savings buffer from the $600 (assuming no further legislative action). When savings are exhausted, workers will cut spending further or fall behind on other financial obligations such as debt and rent
This excellent article by @emilymbadger and @qdbui describes the terrible choices individual workers are making now:
* having trouble paying for school supplies
* considering early retirement
* deciding whether to pay rent nytimes.com/2020/10/16/ups…
Another excellent article by @KateDavidson tracks the savings decisions of individual families wsj.com/articles/pande…
Why do we only have data for August at this point? The data are lagged by 4 weeks and then in this case it took a few weeks to analyze the data. We will continue to release results through the fall. Hopefully we will eventually write a paper about it too. :-)


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More from @p_ganong

15 Oct
When will the current covid Phase 3 vaccine trials read out (give results)?

Timing of results mathematical function of
1) number enrolled
2) local covid prevalence
3) rate of enrollment

1 & 2 known. Take an educated guess for 3.

Any estimates from ID docs or biostats folks?
@13pt @suilee @carlzimmer have a great tracker here nytimes.com/interactive/20…, but it just has what firms say, no calculations based on public records.
I also spent awhile googling. This seems like something that a professional can take an educated guess at, but surprisingly, I haven't found any.
Read 5 tweets
1 Sep
🚨 updated paper on UI replacement rates 🚨

forthcoming in @JPubEcon

How did the $600 UI supplement affect UI replacement rates and what will alternative policies do?

w/@JoeVavra @pascaljnoel

Thread with 3 new results + 2 facts for policy today
Key reasons for update:
1) can use data on pre-job loss earnings of people unemployed during pandemic
2) zoom out to study changes in the labor market as a whole during the pandemic.
3) lots of feedback from #EconTwitter
This is the first time we have gotten significant feedback on our research from twitter. If you gave us feedback, thank you!

We spent as much time improving the draft to respond to q’s from twitter than from actual referees...
Read 14 tweets
24 Aug
Huge puzzle about the role of UI in the economy now

1) $600 UI supplement expired, removing $30 billion/week from the economy
2) Spending trackers for proprietary data look *flat*!

Answer: 1) does matter, but 2) unlikely to capture 1) b/c of wonky data issues.

Deets in 🧵
For Fact 2, on real-time spending trackers, see @OppInsights. Also, the Chase card spending tracker has similarly flat-lined in first half of August.
Sample article pointing out the apparent puzzle by @jimtankersley @jeannasmialek nytimes.com/2020/08/21/bus…
Read 13 tweets
2 Aug
. @stevenmnuchin1: "There's a @UChicago study that goes through all the people that are overpaid"

🌶️This is not what we find 🌶️

@MarthaRaddatz: my coauthors @pascaljnoel @JoeVavra @FionaGreigDC would be glad to talk on your show about our findings about UI

more in thread...
The excellent Yale study that Martha mentions is here news.yale.edu/2020/07/27/yal…
Read 5 tweets
31 Jul
🚨 new predictions of effects of alternative UI benefit supplements 🚨

The UI supplements have expired. Congress is considering a range of options.

What will happen to
1) *consumption*
2) *UI replacement rates*

Thread w/@JoeVavra @pascaljnoel Image
1) with @Farrell_Diana @FionaGreigDC @maxliebeskind using #JPMCInstitute data, we estimate a two-week MPC on UI benefits of 73 cents. Multiplying $600 by the number of UI recipients and dividing by total consumption gives an estimate of % change in cons. institute.jpmorganchase.com/institute/rese…
The decline in consumption from "no supplement" is greater than the entire peak-to-trough decline of the Great Recession.

This reflects just how much the US economy is on life support right now through UI benefits.
Read 12 tweets

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