Firm uncertainty and households: Spending, savings, and risks

Using daily banking and credit card data for thousands of households linked to U.S. publicly listed employers, we find novel evidence that firm-specific uncertainty persistently reduces future spending and spurs precautionary savings. A one-standard-deviation rise in option-implied firm volatility—akin to the S&P 500 VIX—predicts a $106 monthly spending drop (8 hours of wages) and a $193 increase in bank balances, reflecting notable cutbacks in typical non-durable goods and services. The mechanism operates through heightened household risks: firm uncertainty expands both income and consumption risk over the next year, with the largest effects among lower and top earners (notably the top 1%). Employers only partly shield earnings, while households only partly self-insulate consumption risk via smoothing channels. Detrimental uncertainty effects on households are stronger than firm stock price declines.