The “excess savings” that American households accumulated amid the COVID-19 pandemic gradually declined over the last two years and were depleted in the first quarter of this year, according to new research by Federal Reserve economists.
At the outset of the pandemic, massive amounts of fiscal stimulus in the form of direct stimulus payments to American households and other temporary measures like the student loan repayment pause and expanded child tax credit piled up in households’ accounts.
As the pandemic played out, spending was inhibited by concern about the virus, supply chain disruptions and government-imposed lockdowns, which meant that the excess savings did not begin to decline until late 2021.