Americans are still better off, with more in the bank than before the pandemic

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Bank account balances are 10 to 15 percent higher than they were in 2019, new data shows

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Despite a year when inflation pushed prices to new heights, Americans are still better off now than before the pandemic, with nearly 10 to 15 percent more in their bank accounts than in 2019, new checking and savings account data shows.

However, households are rapidly spending down that extra cash they’d socked away during the pandemic. Median account balances are at their lowest levels in roughly three years and have dropped as much as 41 percent from their peak in April 2021, when Americans were flush with government stimulus money and tax returns, according to a JPMorgan Chase Institute analysis of the bank accounts of 9 million Chase customers.

Taken together, the data helps explain the big mystery behind how the U.S. economy has managed to avoid a recession that many economists had forecast: Consumers, supported by a strong labor market, have been able to keep spending despite inflation and a sharp rise in borrowing costs.

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But it also highlights why Americans remain tentative about their economic prospects, particularly as they face higher prices on food, housing and travel. Many have been working through their savings and say their bank account balances are on a downhill trajectory, with little prospect of building them back up to where they were a year or two ago.

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“Obviously there was a huge public health event and unprecedented federal response that landed a lot of money in peoples’ bank accounts,” said Chris Wheat, president of the JPMorgan Chase Institute, a think tank within the country’s largest bank. “From the perspective of an individual household, 2020 is getting farther in the rearview mirror, but you still remember what it was like to have a bigger balance. That feeling of ‘I have less’ has certainly intensified, in part because of inflation.”

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The U.S. economy continues to defy the experts. Even as policymakers hiked interest rates, cooling down many sectors and triggering layoffs across housing, finance and tech, a resilient job market and healthy spending by households and businesses have worked to lift growth beyond what economists had expected at the start of the year.

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Americans are far more optimistic, after more than a year of feeling particularly downbeat about inflation and giving the Biden administration low marks for its handling of the economy. Consumer sentiment spiked in July to its highest level in more than a year and a half, according to a closely-watched metric from the University of Michigan.

“Consumers have absolutely noticed that inflation has slowed down,” said Joanne Hsu, director and chief economist of University of Michigan Surveys of Consumers. “The labor market is still strong, incomes are high, and that’s helped support robust consumer spending.”

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For many Americans, that means bank accounts are more flush than usual. Tony Oxx, a manager at a transportation company in Louisville, has nearly tripled his savings since the pandemic took hold. He’s gotten two raises in that period and his overall pay, including commission and bonuses, has jumped more than 50 percent.

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“I’ve been able to really rake it in,” Oxx, 39, said, adding that he recently upped his 401(k) retirement contributions to 15 percent from 3 percent of his salary. “As far as inflation, I’ve seen some price increases but nothing that hurt too bad. I’m saving a substantial portion — about 25 percent — of what I take home.”

He’s also splurging more. Oxx and his girlfriend just returned from a week-long vacation in Cancún, and he recently paid for an all-inclusive cruise for their parents.

“I’ve never made this much money before,” he said. “This is the first time I’ve been able to pay for my mom to take a whole vacation.”

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Although inflation has often overshadowed pay increases in the past year, that’s beginning to change: Earnings have grown faster than inflation for four straight months. Overall, average hourly wages are up 4.4 percent in the past year, compared with a 3 percent increase in prices in the same period, according to data from the Bureau of Labor Statistics.

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