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JPMorgan Chase Launches Global Think Tank Dedicated to Delivering Data-Rich Analyses and Expert Insights for the Public Good

New JPMorgan Chase Institute releases groundbreaking research using the firm’s proprietary data, expertise and market access

JPMorgan Chase Launches Global Think Tank Dedicated to Delivering Data-Rich Analyses and Expert Insights for the Public Good

New JPMorgan Chase Institute releases groundbreaking research using the firm’s proprietary data, expertise and market access

Published 05-21-15

Submitted by JPMorgan Chase & Co.

JPMorgan Chase & Co. today launched the JPMorgan Chase Institute, a global think tank that will deliver better data, analyses and expert insights designed to address global economic challenges. The new think tank released a groundbreaking inaugural report, Weathering Volatility: Big Data on the Financial Ups and Downs of U.S. Individuals, that uses proprietary data from JPMorgan Chase to provide one of the most in-depth views into how Americans’ income and spending habits fluctuate significantly on a yearly and monthly basis.

Diana Farrell is the founding President and CEO of the Institute. Previously, she was a director and the Global Head of the McKinsey Center for Government and the McKinsey Global Institute at McKinsey & Company. She also served as the Deputy Director of the White House National Economic Council and Deputy Assistant to the President on Economic Policy from 2009-2011.

With an unprecedented level of high-quality data from JPMorgan Chase, the Washington, DC-based Institute will help policymakers, businesses and nonprofit leaders use real-time data and thoughtful analysis to make smarter economic policy decisions that advance global prosperity.

“Real-time data and factual analysis are critical to understanding and responding to our changing global economy,” said Jamie Dimon, Chairman and CEO, JPMorgan Chase & Co. “JPMorgan Chase has the data to help tackle the economic challenges we continue to face. That’s why we set up the Institute – to analyze the data and produce insights that will help leaders in the public, private and nonprofit sectors make more informed choices.”

The Institute was established with the goal of putting the broad spectrum of data within the firm to use for the public good. Over time, the Institute will analyze the granularity, diversity and interconnectedness of the economy and publish analyses on a range of global economic issues. Future research plans include more groundbreaking analytic work on the financial behavior of individuals, insights on the small business sector and expert profiling of global trade and capital flows. The Institute will also bring together prominent thinkers to discuss and analyze the Institute’s findings and develop policies to advance economic prosperity.

“How exposed are individuals to income and consumption volatility over time? Do earning and spending patterns differ across the income spectrum? How much of a financial buffer do households need to weather their exposure to volatility?” said Diana Farrell. “With data-driven analysis, the JPMorgan Chase Institute will be able to answer these and other questions and provide insight to policymakers around the globe to make more informed economic decisions.”

Inaugural Report: Income and Spending Fluctuations of U.S. Consumers

The Institute’s inaugural research report, Weathering Volatility: Big Data on the Financial Ups and Downs of U.S. Individuals showed that individuals across the income spectrum experienced high levels of income volatility and even higher levels of spending volatility.

Seven in ten (70 percent) individuals experienced an annual change in income of at least 5 percent between 2013 and 2014. More than a quarter (26 percent) of individuals experienced at least a 30 percent change. Only 30 percent saw consistent income between 2013 and 2014.

Spending was even more volatile than income. More than eight in ten (84 percent) individuals experienced monthly changes of at least 5 percent over the course of 2013 and 2014. Only one in six (16 percent) saw consistent spending between 2013 and 2014, while one in four (24 percent) people experienced more than a 30 percent change in annual spending during that period.

Income and consumption were more volatile on a month-to-month basis than on an annual basis; 60 percent of people experienced high levels of volatility on a month-to-month basis. The report showed that volatility was not limited to lower income individuals, but was similarly evident across the income spectrum.

Moreover, the data show that income and spending changes did not move in tandem. Three in four people (72 percent) experienced changes in income and spending that did not mirror each other. One in three people (33 percent) saw their annual spending changes positively exceed changes in their income. About four in ten (39 percent) people saw their income changes positively exceed changes in their spending. Only 28 percent experienced income and spending changes of the same direction and magnitude.

Finally, most households did not have a sufficient financial buffer to weather the volatility to which they are often exposed, such as a large medical expense that took place at the same time as a loss in income. A typical middle-income household needs a financial buffer of approximately $4,800 in liquid assets – roughly 14 percent of annual income after taxes – to sustain the typical monthly fluctuations in income and spending observed during this time frame. But, according to the Survey of Consumer Finance, they had only $3,000 in liquid holdings. Similar gaps exist between the buffer needed and actual liquid holdings for individuals across all incomes, except the top income earners.

“Individuals are dealing with high levels of income volatility and even higher levels of spending volatility. Business leaders and policymakers should closely evaluate these trends when taking steps to advance global prosperity,” said Farrell. “Potential solutions include analytical platforms that help people track their earning and spending patterns, policy interventions or new financial products to help people smooth income and spending or put these fluctuations to good use, for example, to help them save money.”

The Institute’s research drew from detailed transaction information for nearly 30 million Chase customers, constructing a unique data asset of 2.5 million account holders. The Institute examined income and spending habits on a transaction-by-transaction basis between October 2012 and December 2014 to draw conclusions about fluctuations in earning and spending among U.S. individuals.

“The data asset that the JPMorgan Chase Institute is creating is unlike any other that currently exists in the field of consumer finance,” said Jonathan Parker, an economist at the Massachusetts Institute of Technology, expert in the field of consumer finance and a member of the academic advisory group for the JPMorgan Chase Institute. “It has the potential to help us better understand people’s financial lives – basic questions about how they earn, spend and save.”

“The JPMorgan Chase Institute data asset gives us a new window into the volatility people experience that can inform innovation in financial tools, products and policies,” said Michael Barr, Professor of Law at the University of Michigan Law School, former Assistant Secretary for Financial Institutions at the U.S. Treasury Department and also a member of the academic advisory group for the Institute.

Commitment to Privacy and Security

The JPMorgan Chase Institute has adopted rigorous security protocols and checks and balances to ensure all customer data are kept confidential and secure. Strict protocols are informed by statistical standards employed by government agencies. Additionally, the Institute’s work with technology, data privacy, and security experts will help maintain industry leading standards.

Before the Institute receives any data, all unique identifiable information – including names, account numbers, addresses, dates of birth, and social security numbers – is removed. The Institute also has put in place privacy protocols for its researchers and only allows aggregated data to be published.

About the JPMorgan Chase Institute

The JPMorgan Chase Institute is a global think tank dedicated to delivering data-rich analyses and expert insights for the public good. Its aim is to help decision makers – policymakers, businesses, and nonprofit leaders – appreciate the scale, granularity, diversity, and interconnectedness of the global economic system and use better facts, real-time data and thoughtful analysis to make smarter decisions to advance global prosperity. Drawing on JPMorgan Chase & Co.’s unique proprietary data, expertise, and market access, the Institute develops analyses and insights on the inner workings of the global economy, frames critical problems, and convenes stakeholders and leading thinkers. For more information visit:  www.jpmorganchaseinstitute.com

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JPMorgan Chase & Co.

JPMorgan Chase & Co.

JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.5 trillion and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world's most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

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