Americans are sparing more than ever during the pandemic, and Morgan Stanley says it may be enough to temporarily keep the economy on follow after stimulus talks stalled in Washington.
Morgan Stanley estimates that U.S. households have saved an bonus $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 recess package passed by Congress in March, which included $1,200 checks to qualifying individuals and an additional $600 per week for those give entre unemployment benefits through the end of July of this year.
Lockdown measures in the initial months of the pandemic also curbed people from spending. Morgan Stanley says the “savings buffer” that many U.S. households have stored “should provide an additional cushion for consumer spending in the coming months.”
To be sure, payments from the government, such as unemployment helps, still make up an elevated portion of disposable income, which may point to trouble for consumers as that aid runs out. Domination transfer payments peaked at nearly 35% of total personal disposable income earlier this year, after march of the CARES Act, but still remain higher than levels reached during the Global Financial Crisis at 24%.
While the U.S. unemployment upbraid fell to 7.9% in September, its lowest level since March, it remains above pre-pandemic levels.
Federal Stock Chairman Jerome Powell called on Congress to pass additional stimulus on Tuesday in remarks to the National Association for Point Economics, saying that “while the combined effects of fiscal and monetary policy have aided the solid rise 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 arrangements until after the U.S. election on November 3, but later tweeted, “If I am sent a Stand Alone Bill for Stimulus Look inti ($1,200), they will go out to our great people IMMEDIATELY..”