Deposits Hit Record: Households Balance Inflation & Job Market

Paying bills

Local household “savings” in checking and other deposit accounts are hitting their highest levels they’ve ever experienced at credit unions, with statewide figures skyrocketing 35 percent in California and 41 percent in Nevada from second-quarter 2019 to second-quarter 2021.

This trend represents an unprecedented two-year increase according to the latest industry snapshot reports for California and Nevada released by the California and Nevada Credit Union Leagues (click each state for data, trends and chart-graphs).

Collectively, deposits made by 13.1 million Californians who are credit union members rose from $172 billion to $233 billion during the June 2019 – June 2021 period at 286 locally headquartered credit unions in the state. In Nevada, deposits increased from $4.6 billion to $6.5 billion at 15 local credit unions.

No other two-year period in recent history has experienced such a boost in California and Nevada credit union deposits by consumers to the tune of a net-positive $61 billion (California) and $1.9 billion (Nevada).

What’s Behind the Trend?
Today’s higher-savings trend this far into an economic recovery that technically started around early summer of 2020 is likely most recently due to consumers traveling less from COVID-19 restrictions and a simultaneous decrease in other purchases because of pandemic issues, according to Robert Eyler, contract economist for the Leagues. For some workers, continued uncertainty about job stability and the economy’s direction are also fueling this “savings” tendency.

Meanwhile, as workers entered the COVID-19 crisis point and came out the other side, their increased deposits have built a financial cushion as local economies and businesses navigate heavy churn, dislocation, repair and renewed hiring needs within the job market, as well as employee decisions amid the so-called “Great Resignation.”

However, Eyler said recent price inflation on goods and services could erode some of these households’ savings for the time being. It remains to be seen whether higher inflation trends will normalize sooner versus later.

“If inflation remains relatively high through 2022 and interest rates on banking deposits begin to react to that increase, households’ savings may move toward higher interest-bearing accounts and put more pressure on credit unions’ net interest margins and net worth,” Eyler said. “But most economists are forecasting a moderation of inflation pressures as global supply chains and post-pandemic consumer demand settle into patterns reflecting less concerns about COVID-19 conditions.”

New Records & Local Numbers
In California, credit union members, total loans, and total deposits either remained-at or reached record highs by June 30, 2021 compared to the year-ago period — 13.1 million members (consumers), $147 billion in loans, and $233 billion in deposits.

In Nevada, membership reached a level not seen since 2009 (378,000 members), loans hit a record $3.5 billion, and deposits reached a record $6.5 billion.

View the snapshot reports (state web links above) for details on first mortgages, HELOCs/home equity loans, new auto loans, used auto loans, credit card lending, and business loans, as well as checking accounts, savings accounts, money market accounts, certificates of deposit, and IRA/Keogh accounts.

Additionally, for savings-and-loan positive/negative growth trends broken out by 11 local regions across California and Nevada (2Q 2020 – 2Q 2021), click here:

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