The National Bureau of Economic Research (NBER) recently released its findings showing how U.S. consumers used their one-time $1200 stimulus payments, including the $500 per child.
In a June survey of 11,000 individuals, the NBER reports that 15 percent of respondents that received stimulus checks spent or planned to spend most of the payment. One third of those surveyed said they saved most of it, while a whopping 52 percent reported to use the stimulus to pay down debt.
As a breakdown of a single check, households on average spent 40 percent of it, while saving 30 percent and making debt payments with the remaining 30 percent.
Average consumer spending of stimulus checks went towards food, beauty, and other non-durable products, while the least went towards bigger items like cars and appliances.
“Customers are being responsible and careful with their stimulus money and their resources,” said Mary Mack, senior executive vice president and CEO of consumer and small business banking at Wells Fargo. “They’re preparing for the unknown.”
The NBER study additionally asked consumers if the stimulus checks impacted their work effort or effort searching for jobs. They found that, of those employed, 90 percent said it had no effect and even 80 percent of those who did not qualify for relief said it would not affect them. For those who are unemployed, 20 percent said the check made them search harder for a job while two-thirds said it had no impact.
“[W]e are the first to report how one-time stimulus payments affect labor supply decisions, an important margin in many macroeconomic models used to characterize the effects of fiscal policy,” the NBER report said. “These results possibly also inform the debate on how additional unemployment benefits affect labor supply decisions during recessions.”
A study done in 2013 found slightly different results in the wake of the 2008 financial crisis. Then, the average household spent 12 to 30 percent on non-durable goods like food after receiving fiscal stimulus relief. But durable purchases increased and led to consumers spending an average of 50 to 90 percent of their stimulus payments.
Disparities between low-income and high-income households are also taken into consideration for the NBER survey. Low income households are more likely to spend their checks. Men, Hispanics, and those with lower education reported to spend more of their stimulus, while African Americans, older people, mortgage holders, and unemployed workers were more likely to use their relief to pay down debt.
These numbers fall in line with U.S. Bureau of Economic Analysis findings that the personal savings rate has actually increased dramatically to 33.5 percent in April and is now closer to 20 percent, much higher than last years rate of around 8 percent.
“The ability to spend [your payment] to regenerate the economy is limited,” said Rohan Williamson, a finance professor at Georgetown University, acknowledging the lack of in-person shopping and entertainment options when much of the country was under quarantine this spring. “Once the pandemic fear is taken care of and Americans feel safe to go out, they will.”