Worcester Business Journal

14 Worcester Business Journal | February 22, 2021 | wbjournal.com A recession coinciding with the start of the coronavirus pandemic last spring sent the American economy into its largest contraction in modern history. While the economy shrunk by roughly a third, banks quickly noticed something else happened: most consumers started pouring savings into their bank accounts. Almost a year later, banking leaders are struggling to figure out what will happen once the pandemic – or at least the worst of it – is over. Will pent-up demand lead to explosive economic growth? Or are people saving more than ever out of worry or survival? "ere are a lot of folks waiting to see what's going to happen," said Brian McEvoy, senior retail banking officer at Webster Five Cents Savings Bank. rough some mix of reasons, Americans saved more in 2020 than they ever had on record. Bankers say much of it has to do with federal CARES Act funds households and businesses received, which typically went into bank accounts and stayed there. Other signs indicate people remain cautious about their spending. For others, there simply aren't any trips to book, games to go to, or restaurants and bars to frequent. No matter the cause, households are saving more than they have at any point since at least the late 1950s, according to the Federal Reserve Bank of St. Louis. Last April, the national savings rate ballooned to 33.7%, doubling its previous high on record, and pushing far past a high of 8.2% during the 2008 recession. Savings remain sky high at 13.7% in December, roughly doubling its typical rate. A lot of those savings are piling into banking accounts, where the security of an insured account outweighs the turbulence of the stock market. Deposits in Massachusetts banks rose by 16% in one year through the end of the third quarter of 2020, according to the Federal Deposit Insurance Corp. "ey want to make sure their savings are safe," said Kathleen Murphy, the president and CEO of the Massachusetts Bankers Association. Lingering worries Savings rates have soared because of two contrasting trends: income has not taken nearly as great of a hit during the pandemic because most people still have their jobs, and people generally are spending far less than they were before the pandemic. e unemployment rate in Massachusetts spiked to 17.7% last June, and through December remained at 7.4% – drastically above the rate a year prior of 2.8%. Even for those who've found work again, the financial scars oen remain, said Marty Connors, the president and CEO of Fitchburg-based Rollstone Bank & Trust. "at group knows what it's like to be unemployed, and they're not going to forget about that quickly," Connors said. Consumer sentiment nationally generally improved as last year went on, but polls still found a lot of uncertainty among consumers, indicating savings may continue to pile up for some time to come. Roughly 40% of Americans said they B A N K I N G & F I N A N C E FOCUS BY GRANT WELKER Worcester Business Journal News Editor Post-pandemic RICHES Americans are saving more money than ever before, and Central Mass. bankers are split on whether this will lead to a post-pandemic spending spree Marty Connors, president & CEO of Rollstone Bank & Trust PHOTO ILLUSTRATION: ADOBE STOCK

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