A quarterly release on U.S. financial accounts from the Federal Reserve on Mar. 11 shows that, on a collective basis, Americans saved a record amount of money during the pandemic.
The value of Americans’ total assets minus their liabilities jumped to $122.9 trillion in the fourth quarter of 2020 compared to $111.4 trillion at the end of 2019. In contrast, during the U.S.’s previous recession, household net worth fell sharply.
Stocks – mainly tech and cybersecurity – have performed strongly. Home prices, spurred by low mortgage rates and a rise in people moving out of cities, have risen.
Additionally, money held in savings and checking accounts rose by $2.8 trillion in the fourth quarter of 2020 from the prior-year period due to the government’s fiscal support and Americans spending less money.
Businesses borrowed more money during the pandemic as well. The Fed’s report indicated that loans to businesses increased by $1 trillion to $11.1 trillion at the end of last year from a year earlier.
Still, the finances of wealthier individuals grew more strongly than lower-income people during the pandemic. Large companies have also benefitted more from consumer spending habits during the pandemic.
A smattering of indicators, ranging from housing sales to retail sales, have indicated the U.S. economy is on its way to a robust recovery. Other indicators, such as consumer sentiment, have declined.
The economy is a long way from our employment and inflation goals, Fed Chairman Jerome Powell said in testimony to the Senate Banking Committee on Feb. 23.
As more economic data is gathered and the vaccine rollout continues, the Federal Open Market Committee (FOMC) said in January it would continue to increase its holdings of U.S. Treasury securities by at least $80 billion and mortgage-backed securities by at least $40 billion. The Fed’s quantitative easing efforts have been in full throttle since last March. With interest rates near zero, there is little room left to cut them further for increased economic stimulus.
The Federal Reserve’s second Beige Book survey on current economic conditions was published on Mar. 4 and indicated that the U.S. economy saw only modest expansion over the six weeks between January and mid-February.
The Fed said the economy expanded in eight of the Fed’s 12 regions, where Federal Reserve banks are placed to monitor major financial activity. The New York area economy declined modestly, and the Boston area saw mixed results, the report said.
In Southern regions, expansion was slight to moderate. In Atlanta, labor market conditions improved, and wage pressure was subdued. Retail spending had no change.
Low-skill occupations are suffering the most, according to the report.
“Constraints on labor supply included those related to COVID-19, childcare, and unemployment benefits,” it said.
