Today I joined @CBCOntarioToday to talk about the remarkably high savings rates among CDN households in the 2nd quarter. Some notes… https://www.cbc.ca/listen/live-radio/1-45/clip/15809736

1. What prompted this: CIBC Economics put out this report

Excess cash
https://economics.cibccm.com/economicsweb/cds?ID=11759&TYPE=EC_PDF

So what’s going on?

2. The savings rate is based on economic accounts (found here with @statcan_eng https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610011201 )
*Compensation to employees down by $100B
*Hhld disposable income up by $144 B
*Consumer spending fell by $174B !!!

—> savings rate jumps to 28%

3. What is happening across households? We don’t really know from these aggregates. Our surveys that will help us figure that out will come later. But we have some pieces of the puzzle

First, how did income increase? Government transfers mattered. Some from CERB, but boosted child benefits, GST credit, seniors benefits and other programs too. Money has been moving (that’s good IMV)

Second, the CIBC report pointed to US evidence that most of the increased savings is in high income households. That makes sense here too - bulk of COVID layoffs/lost hours were low-wage earners and there’s not a lot of room for savings there.

I picture 3 groups saving more:
i. Low earners: laid off, CERB replaced their income, and they should be setting some aside to pay taxes on this later.

ii. Modest earnings: probably saw some drop in income, being cautious and holding a few extra dollars in case things go bad in second wave

iii. High earners, working from home, cancelled Winnipeg Winter vacations! Postponed spending looks like savings.

4. Question: Was CERB too big?

Offered ~ average EI payment, flat rate was easy to administer. Roughly replaced income of a minimum wage worker at full-time hours. Seemed right to me

5. Looking for who got more CERB than they needed?

Receipt among the 55+ stood out to me, given disproportionate layoffs in younger vs. Older groups. Look for people in partial retirement, supplement income with part time jobs in the service sector.

6. On economic recovery - public health is the priority. People with cash aren’t going into stores until it’s safe to do so. On the upside, this isn’t the normal recession, recovery can happen more quickly that we would normally expect.

So wear a mask. And donate to your local foodbank. https://twitter.com/tammyschirle/status/1323019822347788289?s=20

And just one more. If you see someone suggesting benefits were poorly targeted and people just banked it. There’s no data to back that up. At all. They’re just making that up, and it makes no sense to me