Economy—Relations of Stimulus Check, Personal Saving Rate, and Jewelry Sales

In 2020, over $6 trillion of stimulus money was created from thin air by the Federal Reserve and injected directly into the US economy by Donald Trump (and continued by Joe Biden) through COVID relief checks, PPP loans and bailouts for numerous corporations. Again, in 2021, Biden instituted the 'American Rescue Plan Act' which added $1.9 trillion to the pile. That's at least $8 trillion in helicopter money dropped on top of the US economy.^[4]

In this article, we will focus only on the Economic Impact Payments paid to the lower- and mid-income earners.

Figure 1.  Personal Saving Rate tagged with COVID-19 Stimulus Checks for Individuals^[2]

Stimulus Checks vs Personal Saving Rate

The IRS issued three Economic Impact Payments during the coronavirus pandemic for people who were eligible:^[1]

• 1st Stimulus Checks
• $1,200 in April 2020
• 2nd Stimulus Checks
• $600 in December 2020/January 2021
• 3rd Stimulus Checks
• $1,400 in March 2021

Figure 2. Price of Signet Jewelers (SIG) helped by stimulus checks and hurt by higher inflation (or Producer Price Index—proxy of inflation) 

Jewelry Sales (under $500) vs Stimulus Checks

The market for jewelry priced under $500 is cooling off quickly, signaling that lower- and mid-income earners are starting to feel the crunch of the inflationary recession we are in the early innings of.

The revelation came to light last week after Signet, who owns Kay Jewelers and Zales, reported a "steep decline" in demand for such items during their earnings report. As Bloomberg noted last week, higher rent prices and gas prices have put the lower and middle class in a crunch, with far less to spend on discretionary items like jewelry. 

Gina Drosos, chief executive officer of Signet Jewelers, said that spending was robust last year due to stimulus checks and pent-up pandemic savings. Now, the lower class is “much more economically challenged and not spending as much,” she commented. 

Tying Together

From Figure 1&2, here are what we can probably conclude:

• Pent-up pandemic savings were clearly helped by stimulus checks, which in turn helped the spending of lower- and mid-income earners
• Good jewelry sales priced under $500 were also linked to pent-up demands of lower- and mid-income earners

As America and the world reopen from this devastating pandemic together with governments' pre-pandemic easy monetary policies and post-pandemic fiscal policies, it may have also led to higher inflation (i.e. higher PPI; see Figure 2).

References

1. Advance Child Tax Credit and Economic Impact Payments
2. Personal Saving Rate (St. Louis Fed)
3. Signet Sees "Steep Decline" In Sales Of Jewelry Priced Under $500
4. The US Economy Is Still Being Artificially Supported By Trillions In COVID Stimulus