After burning through Covid excess savings, the vast majority of Americans will be worse off next year compared to pre-pandemic levels, according to JPMorgan.

In a Dec. 7 note to investors, the U.S. megabank estimated that 80% of consumers have already exhausted their pandemic windfalls, leaving them vulnerable to an expected economy and job market slowdown in the new year.

All but the top 1% will have it worse in the coming months, the bank’s top strategists warned.

“It is likely that only the top 1% of consumers by income will be better off than before the pandemic,” wrote Marko Kolanovic, JPMorgan’s chief market strategist.

Kolanovic said credit card and auto loan delinquencies are showing the first signs of distress—a claim supported by Creditnews Research’s analysis of consumer delinquency rates.

But it's not just the purchasing power that's at risk for most Americans.

According to JPMorgan strategists, the inflation-adjusted value of liquid assets (a fancy way of saying cash, stocks, or anything that can be easily converted to cash) is expected to decline compared to March 2020 for all but the top 1% of income earners.

In other words, Americans are expected to be less wealthy and have weaker purchasing power than before the pandemic.

Those that have a big net worth in America keep getting bigger and those [who] have no net worth are not making much progress, said Ted Jenkin, founder and CEO of Oxygen Financial.

How much pandemic savings are left over?

During the height of the Covid pandemic, holed-up Americans had a rare opportunity to stow away cash like never before.

Creditnews Research estimated that Americans racked up $2.1 trillion in excess savings by mid-2021. Most of that money went back into the economy in the form of increased spending on everything from durable goods to “revenge travel.”

But now that the sugar rush has worn off, Americans have less than $400 billion in excess savings left—and that amount is clustered among the top 20% of households.

savings by quintile

In fact, JPMorgan’s strategists think that number is much smaller at $148 billion.

Different estimates, but both tell the same story: Americans aren’t flush with cash anymore and are struggling to make ends meet because of rising costs and higher interest payments.

“Unfortunately, households have seen their beefed-up nest eggs get eaten away by inflation over the past two years,” said Stephen Stanley, chief U.S. economist at Santander US Capital Markets.

A uniquely American problem

The U.S. savings rate has declined steadily over the past six months and is now lower than pre-pandemic levels.

According to the Bureau for Economic Analysis, personal savings as a percentage of disposable income fell from 5.3% in May to 3.8% in October. That’s the lowest level since December 2022.

Compared to other major economies like the Eurozone, United Kingdom, Japan, and Canada, the U.S. is the only country where household savings have fallen below the 2015-2019 average.

savings as percentage of income

One reason Americans save less is because more of their money goes toward servicing the record amounts of debt they’ve accumulated.

U.S. consumers now owe a record $1.08 trillion in credit card debt on top of $1.56 trillion in auto loans. According to the Fed, total household debt reached $17.29 trillion in the third quarter—the highest on record.

“The increase in credit card debt and delinquencies reflects in part the increased financial stress on lower-income households, who have been hit hard by the higher cost of living,” said Mark Zandi, chief economist at Moody's Analytics.