SF Fed, Report: The Rise and Fall of Pandemic Excess Savings

“U.S. households accumulated excess savings at an unprecedented speed following the onset of the pandemic recession, relative to other post-1970 recessions. Despite recent rapid drawdowns of those savings, a large amount—around $500 billion—remains in the overall economy.”

“A great deal of uncertainty surrounds precisely how the savings are distributed across household income levels and in what kind of assets they are being kept. Nonetheless, data on household assets and checking account balances support the view that households across the income distribution generally have considerably more liquid funds at their disposal compared with the pre-pandemic period.”

“Overall, we expect the aggregate stock of excess savings will continue to support consumer spending at least into the fourth quarter of 2023. However, uncertainty also surrounds this outlook, including the possibilities that households may now have a higher appetite for savings, significantly shift their spending habits, or receive other sources of income that offset the expired pandemic-era cash inflows.”