Insee Analyses · February 2025 · n° 104

How did households respond to job loss: by reducing savings or cutting back on consumption?

When the duration of unemployment benefits extended to at least six months, job loss led to an average decline in household monthly income of approximately 630 euros, equivalent to a 31% reduction compared to earnings in the previous job. In response to unemployment, households adjusted by reducing their savings to mitigate the decline in consumption: they either accumulated fewer savings or drew down existing reserves. One month after job loss, consumption declined by just 2%, while the reduction in savings almost entirely offset the income shortfall. The longer the unemployment spell, the more households reduced their consumption and the less they drew down their savings.

Six months after job loss, households reduced their savings and consumption to a similar extent; consumption then stood 15% below its pre-unemployment level. Over the first six months of unemployment, consumption declined by the equivalent of 35% of the income loss. The contraction in consumption was particularly pronounced among households with limited liquid assets in their current accounts and savings books.