Sometimes, government stimulus checks are gimmicks to buy votes.
That seemed to be the case for the third COVID check that came in March 2021. Unemployment had already fallen from 14.7% to 6% and the economy was returning to normal.
The first two rounds of payments were largely spent at restaurant delivery services, online grocery stores, online marketplaces and home improvement stores like Home Depot. It’s easier to understand the need for stimulus when the money flows show consumers were staying home.
But that changed the third time around.
Consumers spent that money at department stores buying apparel and cosmetics. Earnest Research reports that restaurants and airlines also benefitted from the payments. Among the biggest beneficiaries were Peloton, Dick’s, Kohl’s, Ross, TJ Maxx, Gap and Southwest.
And another California inflation effort gave us a chance to see whether families need help again.
California Inflation Data Looks Grim
In October, the state issued 2022 Middle Class Tax Refund (MCTR) payments of up to $1,050. The biggest beneficiaries were general merchandise, grocers, gas stations and convenience stores:
Source: Earnest Research.
The chart above shows recipients spent the money on gas and groceries at Sam’s Club. Stater Bros. and Smart & Final are two other grocery stores that benefited.
Payments went to families making up to $500,000 a year, far above the standard definition of middle class. Higher-income households may have used the money to splurge, based on spending at DoorDash and Best Buy.
This paints a grim picture of the economy, at least in California.
Data confirms families needed the tax refunds and used much of the money for basics. This is similar to the pattern seen in the first COVID stimulus payments when unemployment was high and the economy was struggling.
Bottom line: There’s no pandemic now. Yet there’s an economic crisis facing families. It’s inflation. And even 7.7% inflation is too high for families struggling to pay their bills.
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Michael Carr is the editor of True Options Masters, One Trade, Precision Profits and Market Leaders. He teaches technical analysis and quantitative technical analysis at the New York Institute of Finance. Follow him on Twitter @MichaelCarrGuru.