The speed at which the coronavirus pandemic has disrupted our lives has been unrivaled. It is forcing us to adapt quickly, make sacrifices, and think about things that normally take a backseat to thoughts about the big game, spring break, or the family reunion.
I’m proud to live in a great country, whose elected officials can organize and agree on a stimulus plan to ease the pain the coronavirus is causing for all Americans. Not absent of the typical flare that comes with big decisions out of the Capitol, Congress has agreed to multiple economic rescue bills totaling well over two trillion dollars. In fact, an additional three trillion dollar bill has passed the House of Representatives and moves on to Senate voting. These bills are positioned to assist in many areas including our overrun medical system, individuals, businesses of all sizes, and much more. I cannot stress enough how impressed I am with how swiftly we can move as a country.
With this positive news, I cannot help myself from taking a deeper look to better understand the real impact. Two trillion dollars is an unimaginable amount of money, but when thinking about all of the stimulus types like one-time checks, unemployment checks, and PPP loan payouts, many questions come to mind. I’m probably not unlike many of you who are thinking about those close to you who need this money badly. Curiosity is getting the better of me and I wonder how did the various stimulus values get decided? What’s the logic behind those numbers and what is the real impact to Americans?
I don’t believe there is a full-proof way to answer these questions but our banking system has always provided objective data we can rely on for some direction. For instance, the deposit activity and trends of consumers can tell a unique story of impact. Looking at deposit activity in aggregate yields some interesting insight.
Figure 1 looks at a summary of total ACH and checks deposits for account holders of multiple financial institutions nationwide. When removing deposits sourced by the stimulus and compared to previous months, neither March nor April show discernible variation. What is important to remember is the law of averages is in play. For some, the stimulus will result in an increase in deposits, while for others, the relief will not cover the deposit deficit. Seemingly, this depiction tells a more positive story than initially expected. Overall, the stimulus seems to have closed the deposit deficit gap. It not only closed the gap but total deposits in the month of April were higher than any month dating back to January of 2019. One might also surmise that this tells more about the overall positive deposit health from a bank’s point of view.
What isn’t obvious by this depiction is that unemployment deposit transactions in April increased a staggering 1600% over March. However, unemployment deposits accounted for just three percent of total stimulus-based deposits.
The aggregate depiction in Figure 1 yields some useful information but begs for a deeper look into specific deposit sources and populations. Let’s peel away some layers to look at the impact of stimulus on specific populations like families and certain professions.
More About The Data
The insights within this study are derived from samples taken from millions of deposit accounts and focuses on direct and check deposits. The sample represents account owners 18 years of age and older across our country. Cash deposits are not included. This analysis evaluates every transaction made on the accounts to not only identify deposits that have occurred, but also detect from where the deposit originates. For instance, the analysis can identify if the source of the deposit is stimulus-driven in the form of one-time relief checks or new unemployment distributions. An individual's profession from a payroll deposit can also be determined, shedding light on stimulus impact to particular populations of workers. More on this later. Finally, the analysis also evaluates every purchase transaction. It is these transactions that indicate lifestyle or other attributes of individuals pertinent to the stimulus, like the presence of children in the household.
Comparing the Impact: Deposit Activity For Families
First, you might be wondering how it can be determined that a family situation is associated with a deposit account. As I mentioned previously, this analysis looks at every account transaction including purchases with retailers, restaurants, entertainment, daycares, universities, and others. There is regular and significant spend occurring within this population that indicates the presence of children. For example, it can be assumed that recent, regular, and significant spend occurring with day care facilities indicates a child in the household. The same rule can be applied with purchases at children’s clothing retailers like Justice or transfers to institutions, like Greenlight who offers banking products for children. This understanding of transaction behavior, combined with the known one-time stimulus check amounts ($1,200 per individual plus $500 per child) allowed us to narrow in on this specific population.
The amount of stimulus received by families is clearly higher, but it seems Washington got it right, because the deposit deficit of this population is notably more than any other group evaluated. The non-stimulus deposits for this group declined drastically in April. Unemployment deposit transactions jumped by more than 2,000% in April but only accounted for one percent of total stimulus relief dollars deposited. The lion-share of stimulus for families was by way of the one-time stimulus check.
Again, we not only see the deposit deficit gap closed by the stimulus bill, it has helped result in a deposit surplus over previous months. And April, by a large margin, saw higher deposits than any other month dating back to January of 2019.
Comparing the Impact: Retail, Hospitality, and Service Industry Workers
We probably don’t need detailed deposit data to surmise that Americans working in hospitality and service-based industries are feeling the impact of coronavirus in a significant way. Waitstaff, bowling alley employees, rideshare drivers, hotel janitorial staff, hair stylists...the list is daunting and seemingly endless. By analyzing the payroll deposit transactions coming into deposit accounts we are able to identify employer names and brands. Through classification processes we are able to determine employers primarily doing business in the hospitality and service sectors (i.e.restaurants, hotels, cab companies, etc.).
Figure 3 demonstrates some unexpected results. Without actually running the data the assumption was that non-stimulus deposits for retail, hospitality, food service and similar would see a notable decline in April, but only a slight decline occurred. Similar to the other groups, this population was not immune to a notable uptick in unemployment deposits. In fact, a 3400% increase in unemployment type deposit transactions occurred and was expected for these types of professions. Three percent of total stimulus deposits can be attributed to unemployment for these workers.
The real attention grabber of Figure 3 is the fact that non-stimulus deposits were not significantly different from March and even exceeded December 2019 values. Furthermore, average deposits by this group in April of this year exceeds those made in the same month last year without stimulus included. Perhaps the PPP small business loan stimulus has allowed many employers of this population to continue distributing some form of regular pay.
Surprisingly, and on par with previous groups, the stimulus relief for these workers more than accounts for the deposit deficit.
Comparing the Impact: Healthcare Workers and First Responders
The population in Figure 4 was derived from analyzing payroll deposits into accounts for those who work in healthcare. Hospital, PCP, Pharmacy, and similar workers make up this population. These workers were highlighted because the assumption was that due to the essential nature of these professions, there would be less likelihood of considerable deposit deficits. The numbers support this hunch with no significant variation in non-stimulus deposit activity for this group. Further supporting this and by excluding stimulus-type deposits, average deposits were slightly higher in April of this year than last year.
However, it was surprising to see unemployment-type deposits for healthcare workers increase by 5,100% in April but again only representing one percent of total stimulus relief deposited.
Not unlike other populations described, those workers who have been deemed as essential and continue to go to work on a daily basis to help our country overcome this virus are experiencing a well-deserved surplus in deposits. They not only maintain their current income levels but also receive the positive impact of the stimulus.
This pandemic, and how it will impact our lives, businesses, and our collective future over the long-term, is difficult to predict. Each of us will have a unique perspective and story to tell as we will one day look back and reflect. By evaluating the impact of stimulus relief through a single lens and perspective of deposit activity, the resulting feelings for me are a mix of comfort, concern, and hope. In the near-term it is impressive and comforting that the stimulus impact is getting the job done. Concern festers because a huge majority of the deposit deficit makeup is credited to the lump sum stimulus checks and it is hard to imagine that will be replicated anytime soon. Hope is building for me because reopening is starting to take place for many states, which means some of our unemployed or furloughed population will be able to get back to work.
For financial institutions, this is a peek into the different realities being experienced by diverse populations. This view gives the institution clarity on customers likely in need of flexibility or consultation on financial wellness. It also reveals unique indicators of those customers worthy of taking measured risks on. Perhaps the traditional credit score approach to measuring loan risk should become less influential to the loan decision process.
Timelines for social distancing and other protective measures continue to be a state-by-state decision. It is unlikely we will return to our normal lives all at once. Furthermore, some are reporting it could take up to 20 weeks for everyone to receive their complete stimulus relief and the unemployment story will continue to be told. This data will evolve and cede insight for weeks and months to come.