U.S. personal savings rate close to Depression-era rates
Have personal financial bloggers taught us NOTHING?
The Commerce Department reported Monday that the savings rate fell into negative territory at minus 0.5%, meaning that Americans not only spent all of their after-tax income last year, but had to dip into previous savings or increase borrowing. The savings rate has been negative for an entire year only twice before — in 1932 and 1933 — two years when the country was struggling to cope with the Great Depression.
A negative savings rate means that Americans spent all their disposable income, the amount left over after paying taxes, and dipped into their past savings to finance their purchases. For the month, the savings rate fell to 0.7%, the largest one-month decline since a 3.4% drop in August.
NPR’s Marketplace painted a slightly happier statistical picture about Amercian spending and savings rates:
"The picture may not be as dire as it sounds. During the Depression, Americans weren't saving because a quarter of the labor force was out of work. But today, they have more ways of building wealth. Carl Steidtmann is chief economist with Deloitte Research. He says the savings rate doesn't include money made on the stock market or from the sale of a home."
Of course, the end of the Marketplace segment had to mention that the Chinese save 30% of their salaries. I would like to point out that the Chinese also live with their parents for most of their lives, at least until marriage and often thereafter (I mean to offer no negative cultural judgement here — I like my parents, and if they lived in a city where I could work, I'd happily live with them until I got married).
Helpful graphic from the Bureau of Economic Analysis.
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