For years, government officials and economists have debated whether historical measures used to calculate Gross Domestic Product and other economic indicators are accurately capturing the full context of consumer behaviors in the economy.
Now, policy makers and economists are expected to get additional support from a new and unexpected research partner: JPMorgan Chase.
The bank recently launched a global think-tank called the JPMorgan Chase Institute which is aimed at delivering data-rich analyses and insights from its 30 million customers to develop a more granular representation of the U.S. economy.
For instance, the institute’s inaugural research report, Weathering Volatility: Big Data on the Financial Ups and Downs of U.S. Individuals, reveals that people across the income spectrum have experienced high levels of income instability in recent years and even higher fluctuations in spending.
For example, seven in ten people (70 percent) experienced an annual change in income of at least five percent between 2013 and 2014. More than a quarter (26 percent) of the 2.5 million account holders whose income and spending habits were analyzed experienced at least a 30 percent change.
Meanwhile, spending volatility was even more pronounced. More than eight in ten (84 percent) of people experienced monthly spending changes of at least 5 percent over the course of 2013 and 2014. Nearly one in four (24 percent) experienced more than a 30 percent change in annual spending during that period.
Economists have long feared that most U.S. households would have enough savings to weather a large unexpected expense, such as a medical bill or a major household repair at the same time as a significant loss of income.
In its study, the JPMorgan Chase Institute found that while the average middle-income family would need a buffer of about $4,800 to sustain the kind of monthly fluctuations in earnings observed during this timeframe, that level of savings is typically achieved by just the highest earners.
Conducting these types of analyses across millions of account holders can enable policy holders and economists to make more informed decisions. Lessons learned from the institute’s Big Data studies could eventually enable government officials and economists to apply larger data sets to obtain more detailed views of how the economy is performing.