New JPMorgan Chase Institute releases
groundbreaking research using the firm’s proprietary data,
expertise and market access
First report reveals individuals across the
income spectrum experience significant income and spending
volatility; Middle-income individuals lack sufficient financial
buffer for emergencies
JPMorgan Chase & Co. today launched the JPMorgan Chase
Institute, a global think tank that will deliver better data,
analyses and expert insights designed to address global economic
challenges. The new think tank released a groundbreaking inaugural
report, Weathering Volatility: Big Data on the Financial Ups and
Downs of U.S. Individuals, that uses proprietary data from JPMorgan
Chase to provide one of the most in-depth views into how Americans’
income and spending habits fluctuate significantly on a yearly and
monthly basis.
Diana Farrell is the founding President and CEO of the
Institute. Previously, she was a director and the Global Head of
the McKinsey Center for Government and the McKinsey Global
Institute at McKinsey & Company. She also served as the Deputy
Director of the White House National Economic Council and Deputy
Assistant to the President on Economic Policy from 2009-2011.
With an unprecedented level of high-quality data from JPMorgan
Chase, the Washington, DC-based Institute will help policymakers,
businesses and nonprofit leaders use real-time data and thoughtful
analysis to make smarter economic policy decisions that advance
global prosperity.
“Real-time data and factual analysis are critical to
understanding and responding to our changing global economy,” said
Jamie Dimon, Chairman and CEO, JPMorgan Chase & Co.
“JPMorgan Chase has the data to help tackle the economic challenges
we continue to face. That’s why we set up the Institute – to
analyze the data and produce insights that will help leaders in the
public, private and nonprofit sectors make more informed
choices.”
The Institute was established with the goal of putting the broad
spectrum of data within the firm to use for the public good. Over
time, the Institute will analyze the granularity, diversity and
interconnectedness of the economy and publish analyses on a range
of global economic issues. Future research plans include more
groundbreaking analytic work on the financial behavior of
individuals, insights on the small business sector and expert
profiling of global trade and capital flows. The Institute will
also bring together prominent thinkers to discuss and analyze the
Institute’s findings and develop policies to advance economic
prosperity.
“How exposed are individuals to income and consumption
volatility over time? Do earning and spending patterns differ
across the income spectrum? How much of a financial buffer do
households need to weather their exposure to volatility?” said
Diana Farrell. “With data-driven analysis, the JPMorgan
Chase Institute will be able to answer these and other questions
and provide insight to policymakers around the globe to make more
informed economic decisions.”
Inaugural Report: Income and Spending Fluctuations of U.S.
Consumers
The Institute’s inaugural research report, Weathering
Volatility: Big Data on the Financial Ups and Downs of U.S.
Individuals showed that individuals across the income spectrum
experienced high levels of income volatility and even higher levels
of spending volatility.
Seven in ten (70 percent) individuals experienced an annual
change in income of at least 5 percent between 2013 and 2014. More
than a quarter (26 percent) of individuals experienced at least a
30 percent change. Only 30 percent saw consistent income between
2013 and 2014.
Spending was even more volatile than income. More than eight in
ten (84 percent) individuals experienced monthly changes of at
least 5 percent over the course of 2013 and 2014. Only one in six
(16 percent) saw consistent spending between 2013 and 2014, while
one in four (24 percent) people experienced more than a 30 percent
change in annual spending during that period.
Income and consumption were more volatile on a month-to-month
basis than on an annual basis; 60 percent of people experienced
high levels of volatility on a month-to-month basis. The report
showed that volatility was not limited to lower income individuals,
but was similarly evident across the income spectrum.
Moreover, the data show that income and spending changes did not
move in tandem. Three in four people (72 percent) experienced
changes in income and spending that did not mirror each other. One
in three people (33 percent) saw their annual spending changes
positively exceed changes in their income. About four in ten (39
percent) people saw their income changes positively exceed changes
in their spending. Only 28 percent experienced income and spending
changes of the same direction and magnitude.
Finally, most households did not have a sufficient financial
buffer to weather the volatility to which they are often exposed,
such as a large medical expense that took place at the same time as
a loss in income. A typical middle-income household needs a
financial buffer of approximately $4,800 in liquid assets – roughly
14 percent of annual income after taxes – to sustain the typical
monthly fluctuations in income and spending observed during this
time frame. But, according to the Survey of Consumer Finance, they
had only $3,000 in liquid holdings. Similar gaps exist between the
buffer needed and actual liquid holdings for individuals across all
incomes, except the top income earners.
“Individuals are dealing with high levels of income volatility
and even higher levels of spending volatility. Business leaders and
policymakers should closely evaluate these trends when taking steps
to advance global prosperity,” said Farrell. “Potential
solutions include analytical platforms that help people track their
earning and spending patterns, policy interventions or new
financial products to help people smooth income and spending or put
these fluctuations to good use, for example, to help them save
money.”
The Institute’s research drew from detailed transaction
information for nearly 30 million Chase customers, constructing a
unique data asset of 2.5 million account holders. The Institute
examined income and spending habits on a transaction-by-transaction
basis between October 2012 and December 2014 to draw conclusions
about fluctuations in earning and spending among U.S.
individuals.
“The data asset that the JPMorgan Chase Institute is creating is
unlike any other that currently exists in the field of consumer
finance,” said Jonathan Parker, an economist at the
Massachusetts Institute of Technology, expert in the field of
consumer finance and a member of the academic advisory group for
the JPMorgan Chase Institute. “It has the potential to help us
better understand people’s financial lives – basic questions about
how they earn, spend and save.”
“The JPMorgan Chase Institute data asset gives us a new window
into the volatility people experience that can inform innovation in
financial tools, products and policies,” said Michael Barr,
Professor of Law at the University of Michigan Law School, former
Assistant Secretary for Financial Institutions at the U.S. Treasury
Department and also a member of the academic advisory group for the
Institute.
Commitment to Privacy and Security
The JPMorgan Chase Institute has adopted rigorous security
protocols and checks and balances to ensure all customer data are
kept confidential and secure. Strict protocols are informed by
statistical standards employed by government agencies.
Additionally, the Institute’s work with technology, data privacy,
and security experts will help maintain industry leading
standards.
Before the Institute receives any data, all unique identifiable
information – including names, account numbers, addresses, dates of
birth, and social security numbers – is removed. The Institute also
has put in place privacy protocols for its researchers and only
allows aggregated data to be published.
About the JPMorgan Chase Institute
The JPMorgan Chase Institute is a global think tank dedicated to
delivering data-rich analyses and expert insights for the public
good. Its aim is to help decision makers – policymakers,
businesses, and nonprofit leaders – appreciate the scale,
granularity, diversity, and interconnectedness of the global
economic system and use better facts, real-time data and thoughtful
analysis to make smarter decisions to advance global prosperity.
Drawing on JPMorgan Chase & Co.’s unique proprietary data,
expertise, and market access, the Institute develops analyses and
insights on the inner workings of the global economy, frames
critical problems, and convenes stakeholders and leading thinkers.
For more information visit: jpmorganchase.com/institute.
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Media:JPMorgan Chase & Co.Steve O’Halloran, 302-282-5699
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