The New York Times has a very peculiar story today:
Infusions of government cash that warded off an economic calamity have left millions of households with bigger bank balances than before the pandemic — savings that have driven a torrent of consumer spending, helped pay off debts and, at times, reduced the urgency of job hunts.
But many low-income Americans find their savings dwindling or even depleted. And for them, the economic recovery is looking less buoyant.
The first bolded sentence is certainly true, as regular readers know:
Overall, "excess" savings are down to about zero. We're all on our own now.
The second bolded statement is also true. At least, it sure seems like it must be true. If overall excess savings are zero, it stands to reason that the excess savings of low-income households are also zero—or maybe even less. But the Times treats this as a new discovery on its part and offers up the following chart in evidence:
This is based on checking account balances, which is never explained. Are checking account balances good proxies for savings? That's not obvious to me.
What's worse, though, is that this chart shows that low-income families are doing better than anyone else. Their checking account balances are still 70% above their pre-pandemic level, and since this is apparently driven largely by child tax credit payments it ought to last a while longer. Maybe a lot longer, if the BBB bill ever passes.
The author of the piece later makes the point that even if low-income families have a bigger percentage increase than richer families, that's still not much in absolute dollars. This is true, of course, but it's true for virtually everything this side of winning the lottery. It's meaningless.
Anyway, I don't get the point of any of this. I don't understand the use of checking account balances. I don't understand why we're supposed to think low-income families are worst off when, in fact, they're doing better on this particular metric than anyone else. Nor do I understand why a return to normal savings levels should be a huge economic problem if nearly everyone is back to work—as they are even now, let alone six months from now. I'm just mystified.
I really feel like the media is highly narrative driven and they have decided on a narrative that the Biden economy is bad. Now they are on a quest to prove it.
I do not know that this is really intentional on their part, I think they are just heavily invested in talking to people and they are hearing from people that the economy is bad. They refuse to consider that what people say is mostly a creation of the media so rather than acknowledging that people saying the economy is bad because the media and particularly Fox News, invests heavily in telling them it is bad, they desperately search for data that would explain these beliefs as something other than a creation of the media.
So we get stories like this, or about someone who is a huge outlier in milk consumption, or a laser focus on some other small segment of the economy that really is doing badly. This let's them rationalize the public perception as something other than the result of their own writing which is constantly portraying the improvement in the economy as disappointing, despite low unemployment, economic growth, and wage growth. They seem to be getting slightly more desperate to explain public perceptions with real data so we are getting stories like this.
worst off?
I should have read your comment first. You said the same thing I did, only I think you give the media too much credit. I don't think it's a big conspiracy or anything but I don't think they are all that innocent either. These are not stupid people.
Thing is much of the media, and the people in it, are just 'following the narrative'. Fitting the data to whatever story they are writing (rather than the other way around). That's already bad.
But a big chunk of US media are not just doing that. They are working under evil billionaires and with right wing political operatives to *create* the narrative that is favorable to tax cuts for the rich.
So 'the narrative' tends to run in particular directions.
And that's really very bad for the nation and the world.
Of course - most Jouranlists are Bad at Math and are from backgrounds like English studies or literature or just journalism - in essence story telling of a kind.
Since most Journos are Bad at Math and have only the passing understanding of statistics and economics, the Latest Anectdote trend they narrativize.
Et Voila.
My guesses as to why they used checking account balances include (1) the data was readily available and (2) if people have any type of bank account at all - remember, the poor often are described as being “unbanked” - it’s overwhelmingly likely to be a checking account (not a savings or money market account which have more onerous minimum balance requirements, number of withdrawals limits, etc.). Still may not be the best at proving their point as Kevin says.
Was going to chime in with basically the exact same comment.
I find all this stuff a bit hard to parse, but on one question that Kevin asks...
Are checking account balances good proxies for savings? That's not obvious to me.
...my intuitive sense would be yes, checking account balances would be what you'd want to look at when you wish to investigate the savings of lower-income people (for the reasons you state). Basically, paycheck-to-paycheck people in many cases (I'd guess) have only checking accounts. Why go to the expense/trouble of setting up savings vehicles when you have no savings? (Indeed I wouldn't be surprised if quite a few more affluent folks likewise eschew bank savings accounts, given the abysmal rates; they put their excess cash elsewhere).
I expect checking account balances are a good way to get a look at 'savings' for lower income people. And also at short term movement in savings for all non-rich people.
That's where my savings went when I wasn't paid much.
And that was when savings accounts might pay a percent or two in two real interest.
Yes! Not sure what sort of "savings" vehicle Kevin assumes people in the bottom 'tiles would be using. Perhaps he thinks they'll simply dip into their brokerage accounts??
They just call their trust manager to disburse some cash from granpa's legacy.
What's worse, though, is that this chart shows that low-income families are doing better than anyone else. Their checking account balances are still 70% above their pre-pandemic level...
This is the real head-scratcher. The Times's graph seems to be in stark opposition to the lede.
Which is why it was discounted. Ok, so everybody has more money, but that's still not a lot of money in absolute terms, so it doesn't count. Of course, it the poor had a lot of money in absolute terms, then they wouldn't be poor.
worst off?
It's not hard to understand. The mainstream media decides what the conventional wisdom is and then mainstream outlets like the NYT task reporters with writing stories that demonstrate the conventional wisdom.
Right now the media's CW is that the economy is going down the tubes. Thus this reporter was told not simply research how changes in savings rates are impacting the poor, but to write a story showing that changes in savings rates among the poor show that the economy is a wreck. And that's what the reporter did, regardless of what the facts show. Get it?
Going down the tubes doesn't work. Thus Biden surging with Indies.
Just figuring out how to fit the data to the narrative, as they normally do.
Sorry Kevin, economics is complex and newspaper reporters can't be expected to understand everything nor should you. Checking account balances are one measure of savings, but the Personal Savings measure which Kevin has shown (and I have linked also) is different - it is "personal income less personal outlays and personal taxes". I think that checking account balance is a more direct measure, but there is no one correct measure. Things are complicated by past-due rent and the somewhat belated payout of the rent-support money. It's good that people got money to tide them through the pandemic and to give them some leverage against employers, but that money is contributing to inflation. In comparing low- versus high-income people, it has to be kept in mind that it was overwhelmingly the lowest- income people who actually lost their jobs at the start of the pandemic - that's why average wages took a considerable jump at that time.
There is no reason to expect a daily story in any newspaper to come to some overall conclusion about where the economy is headed. The account balance stat is certainly one thing that has not received attention and is actually important. To some extent other stuff in the piece is padding around that.
Ink to spill, columns to fill, tire ads to sell...
#ThatFuckingNewspaper
While it is interesting to know what the account balances have been doing, on second look the graph from the Times article (originally from Moody's) looks very fishy. Why are the curves for the different quartiles almost exactly the same except for scaling? There is no real reason for the balances of different quartiles to do this. I am guessing that they have some overall measure of all balances, then just applied some factors to get the different quartile curves. I am not going to spend time chasing this down, but it certainly calls into question any implications about how different quartiles are doing - this may be something that the authors have superimposed on the data.
I really don't like that someone collects checking account data sufficient to build that damn chart. To match my balance to my income! What the heck?
What they may have is the totals in checking accounts, not necessarily complete data on individuals' balances combined with their incomes. As I said in the previous comment, they may be applying some otherwise-derived income factors to scale the overall balance curve to approximate curves for income levels. Those curves are clearly not derived from actual data on the different income quartiles.
As I recall, there are some reporting rules for banks on account activity. Probably enough of that to fill in the blanks around total income, and probably enough of a sample to guess the whole population, too.
I wish someone would have told me decades ago that it was pointless to keep money in a savings account -- that it was better to just dump it into at least a muni fund.
Then destroy the NYT. No more papers and importantly internet connection.
Here is a question that can only be asked here: Maths is hard. Just how much wealth has been injected into the economy from the estates of the covid/excess mortality cohort?
Since the Gulf war and HRC emails, I have learned that the NYT does not care if it is right. Just that you have looked. In this they are like all the rest.
But then you, unlike the Journal, don't shill for the GOP.