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RESEARCH Household Pulse: The State of Cash Balances through March 2022

Last Updated with March 2022 data

The COVID-19 pandemic resulted in an unprecedented recession that impacted families’ financial positions. Based on recent JPMorgan Chase Institute research, our Household Finances Pulse leverages de-identified administrative banking data to analyze changes in cash balances during the COVID-19 pandemic and ongoing recovery.

This release examines the path of household cash balances through the end of March 2022, giving us a look at liquid asset trends during the months following the expiration of advanced Child Tax Credit (CTC) payments. We compare cash balance trends across income and age distributions, and between families who did and did not receive advanced CTC payments.

During the pandemic, the federal government provided cash assistance and relief to families through a range of fiscal interventions. Three rounds of stimulus, or Economic Impact Payments (EIP) provided cash benefits to families earning below specified income thresholds, with the dollar amount of the benefit determined by the size of the family, and progressively more paid per child in each round1. Stimulus payments landed in April 2020, January 2021, and March 2021. Throughout this time, expanded unemployment insurance delivered payments to jobless workers, including gig workers and self-employed workers, with weekly supplements to typical benefits which were phased out in 20212. Finally, the American Rescue Plan increased the dollar amount of CTC payments and expanded eligibility for families in the 2021 fiscal year. Monthly advanced CTC payments were disbursed from July through December 2021, covering half of the total tax credit3; the remainder will arrive when families file tax returns for the 2021 fiscal year.

To put our measures of family checking account balances into perspective with other household finance metrics, there are three important considerations to keep in mind. First, our balance growth numbers are based on nominal dollars, not adjusted for inflation. This is especially noteworthy given the high rate of inflation in the economy: inflation rose by 8.5 percent in for the year ending March 2022, the fastest pace in four decades4. Second, the charts below do not account for the secular upwards trend of liquid balances prior to the pandemic. For our sample, cash balances in the first two months of 2020 had grown by roughly 7 percent on a year-over-year basis, implying that early 2022 cash balances could have been up by 23 percent compared to 2019 levels, independent of the pandemic and corresponding government interventions. Finally, there is significant heterogeneity in asset allocations for different groups of households5. Families that hold a larger share of their financial wealth in checking accounts may have maintained a larger proportion of their balance increases from government intervention in their checking accounts. Thus, other cash balance metrics may differ from ours in amount or trend, based on these or other differences in measurement.

Finding One: We observe the beginning of tax return up-ticks in balances in March 2022, enabling families across the income distribution to maintain elevated cash balances, particularly low-income families.

As of February 2022, balances were holding steady at elevated late-2021 levels across the income spectrum (Figure 1). In typical years, January and February often represent slightly depressed balances relative to the end of the prior year, so maintaining somewhat steady levels from late 2021 through February 2022 resulted in upticks on a balance percent-change basis, which we observe for all income groups (Figure 2). Balance increases began in March 2022, as tax return payments ramped up for the year.6 Because this is in line with previous years’ March balance patterns, percent-change metrics returned roughly to parity with late-2021 levels in March. The second income quartile deviated from this pattern slightly, falling below late-2021 percent-change values with its March decline – while families in this group maintain balances 50 percent higher in March 2022 than March 2019, their December 2021 balances were nearly 60 percent elevated relative to 2019.

Figure 1: Median checking account balances remained boosted across the income distribution with slight up-ticks in March 2022, though the lowest-income families had less than $1,500 in their checking accounts.

Figure 2: In March 2022, median cash balances were up to 70 percent elevated for low-income families.

Finding Two: Prime working aged adults (35-54) saw the steepest declines in their balance gains.

Overall, checking account balances by age follow the same patterns discussed in the previous section by income: median balances remained steady through February 2022 and increased with tax time in March; corresponding percent-change upticks in the first two months of the year leveled out in March, returning to late-2021 values. These trends held across age groups, though the middle group (aged 35 to 54 years) experienced a larger dip in percent-change: in late 2021 their balances were 50 percent elevated relative to 2019, which decreased to 42 percent elevation in March 2022. As we discuss below, this could be due to CTC-recipient families—concentrated in the 35-54 year age range—receiving smaller tax refunds in 2022 as a result of the advanced CTC payments.

These balance trends are interesting in light of age differences in labor force participation trends. Labor force participation—the proportion of the civilian noninstitutional population currently in the labor force, measured by the Current Population Survey7—regained much of its pandemic decreases by March 2022. For 18 to 34 year-olds, labor force participation rates dropped from 76.1 percent in 2019 to a pandemic low of 74.3 percent in 2020, a drop of 1.9 percentage points. By March 2022, they had regained 1.7 percentage points, or 90 percent of their pandemic drop. 35 to 54 year-olds had a similar experience, regaining 83 percent of their pandemic drop in labor force participation by March 2022. The oldest group, those aged 55 years and over, had regained only 28 percent of their pandemic labor force participation decrease by March 2022. Despite lower than typical labor force participation rates, the 55 and older group continues to maintain elevated cash balances, ranging from 40 to 60 percent elevated relative to 2019 in recent months.

Figure 3: Median checking account balances remained boosted across age groups, with the youngest families maintaining the lowest cash balances.

Figure 4: In March 2022, median checking account balances were 60 percent elevated for the youngest families.

Finding Three: Balances began to diverge in early 2022 by advanced CTC recipient status, and by the end of March, cash balances among CTC recipients had fallen to 35 percent elevated compared to 50 percent among non-recipient families.

With the end of advanced CTC payments in 2021, balances among CTC-targeted families decreased slightly in early 2022. In late February, when many families receive their tax refunds each year (Farrell, Greig, Hamoudi, 2019), balances among CTC-targeted families increased. This tax-time related balance increase was smaller in 2022 than in 2019, however, as evident in Figure 6. This could be due to the fact that families receiving advanced CTC payments may have received a smaller tax refund at tax time, since they only received $1,500 or $1,800 per child at tax time (half of the max per child benefit of $3,000 or $3,600) in 2022 compared to the full $2,000 CTC per child in prior years. Thus on a percent basis CTC recipient families appear to be depleting gains after the expiration of advanced CTC payments, decreasing in February and March 2022 and falling below non-recipient families. Recipient families’ balances were roughly 60 to 75 percent elevated during advanced CTC payment distribution (July through December 2021) and into January 2022. This decreased to 35 percent elevated by the end of March 2022. It is unclear whether they will continue to deplete their balance gains in the coming months.

Meanwhile, the balances of families who did not receive advanced CTC payments continue to be elevated both in absolute and in percent terms. As of the end of March 2022, at $3,000 they were roughly 50 percent higher than their baseline level of $2,000 in 2019.

Figure 5: CTC-targeted families saw larger increases in cash balances with each round of stimulus, compared to non-targeted families.

Figure 6: In March 2022, cash balances among advanced CTC recipients were roughly 35 percent elevated compared to 50 percent among families who did not receive advanced CTC.





Authors

Fiona Greig

Co-President

Erica Deadman

Consumer Research Lead