Yahoo Finance’s Brian Cheung breaks down how American’s spent their stimulus checks.
Video Transcript
ADAM SHAPIRO: Let’s turn our attention to Yahoo U. We want to talk about the stimulus checks that a lot of people got and where they spent that money. Brian Cheung is in the house, and for this we were refer to him as Professor Cheung, so listen.
BRIAN CHEUNG: Well, class is in session, and a major part of the CARES Act from March was the Economic Impact Payments, or that $1,200 in stimu that you either got as a direct deposit to your bank account or as a check in the mail. Now, with the White House, Senate Republicans, and House Democrats still in a standoff, a second round of stimulus checks Is really Schrodinger’s stimulus. It’s not dead, but it’s also not a hope to hold your hat on. But the stimulus checks were enormously helpful. So let’s take a look at data to contextualize this.
So pulling this up– give me a second here. (CHUCKLING) Now, the most important takeaway is that the lowest income needed those stimulus payments the most. And what’s unique about the stimulus checks is that everyone got one. So a Philly Fed survey shows that among those in the higher end of the spectrum, those making more than $125,000, most, about 60%, put the money into savings.
It was really the people who made less money, specifically less than $40,000 a year, that leaned heavily on using that stimulus money to make ends meet. In fact, in this case, only a fifth said they would put any into savings. So what did they spend on? They put it into things they needed to survive– food, medicine, rent. A good chunk of them also paid down debt. And this is critical because this specific demographic, those making less than $40,000, were particularly impacted. Fed data shows that 39% of households in this category that had a job in February ended up losing that job by March.
Now here’s BLS data using the Household Pulse Survey which illustrates that point. And among those who lost income, obviously most commonly because they lost their job, 81%, or the orange bar here, said they mostly spent the money on expenses. Now compare that to those that didn’t experience any job loss, where 60% of people said they spent the money.
Now think about the goal of the stimulus checks, right? It was obviously to help people make ends meet, but it was also supposed to stimulate what? The economy. So it was really the lower-income people that put the money back into their local grocer, their local pharmacy. In fact, this is where the program was really the most successful.
Now here’s another way of looking at the way that people used the stimulus checks– those who got sick. And this is really the one place that I want to highlight where stimulus may have really helped versus that extra $600 a week in unemployment insurance that we talked about at length on these programs. About the same share, 81% or the orange bar again, who were ill themselves with COVID-19 or something else during that period, reported that they used the money on expenses instead of saving, which is the purple bit here. Not a high percentage.
Now think about every one who was sick. It doesn’t necessarily mean that they didn’t have a job, but they may have had a low-paying job where you couldn’t collect the unemployment insurance benefits, but you were making low enough income where you were really on thin ice. If you had to cover a medical expense, that could have sunk you entirely. In that case, not having access to unemployment insurance meant that the stimulus checks really helped.
Now lastly it’s worth noting that the stimulus checks were supposed to be a way also to get the money out quick. Most people got their money by mid-May. This is the same Philly Fed survey that shows about 63% of people had that stimulus money by May 12th. But not everyone has gotten their money. Notice the plateau that occurred between the June and July periods at about 80% or so. Now if you didn’t set up a direct deposits, you probably waited weeks, even months in some cases, for a paper check or a debit card to arrive in the mail.
And as of July, again, only about 80% of respondents said they got any money. It’s not supposed to be 100% because not all the population is eligible, but that 20% gap is still large and implies that people still haven’t gotten their stimulus checks, even if they’re eligible. In fact, the IRS actually just said last month that there could still be about 9 million people who are eligible but haven’t gotten their money yet because they’re maybe non-filers. They don’t have something on file. There could be many reasons. Those may be the people that need it the most. But again, as we talk about this second round of stimulus, it’s important to note how impactful those Economic Impact Payments were and how they probably should be part of a next package, of course, assuming we even get one, Adam.
ADAM SHAPIRO: Brian, thank you.
