Tags: Coronavirus | new york times | economy | savings | 2020 | middle class | white collar

NY Times: Rise in Middle Class Savings Led to Market Boom

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By    |   Friday, 01 January 2021 10:44 AM

Although the coronavirus pandemic disrupted the worldwide economy on a massive scale, many markers for economic success, such as asset prices, have reached new heights thanks in part to “the rise in savings among white-collar workers,” according to The New York Times.

The newspaper notes that while “Large swaths of the economy have been shut down” and “millions are out of work,” employee compensation has only fallen by 0.5% in the nine months between March and November of last year. The Times attributes this to most of the job losses being in lower-paying service jobs, while higher-paying professional jobs were largely unaffected, and some jobs, like warehouse and grocery store workers, saw a sharp increase in business.

“The arithmetic is as simple as it is disorienting,” note the Times’ Neil Irwin and Weiyi Cai. “If a corporate executive gets a $100,000 bonus for steering a company through a difficult year, while four $25,000-per-year restaurant workers lose their jobs entirely, the net effect on total compensation is zero — even though in human terms a great deal of pain has been incurred.”

Data from the Bureau of Economic Analysis shows that Americans’ total disposable personal income rose by just over $1 trillion in 2020 and personal savings rose by just over $1.5 trillion, an increase of 173% from the year before, while total household spending has fallen by more than $500 billion.

However, the Times notes: “Just because you can explain these market gains doesn’t mean that high asset prices will hold. You could tell a story in which the economy roars back as people are vaccinated, and the entire pattern reverses itself, with the savings rate turning negative as Americans spend down their stockpiled wealth on trips and other luxuries that have been off-limits in 2020. It could spur inflation, which, if severe enough, could cause the Fed to back off its easy money approach sooner than people now think.”

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Although the coronavirus pandemic disrupted the worldwide economy on a massive scale, many markers for economic success, such as asset prices, have reached new heights thanks in part to "the rise in savings among white-collar workers," according to The New York Times. The...
new york times, economy, savings, 2020, middle class, white collar, market
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2021-44-01
Friday, 01 January 2021 10:44 AM
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