US savings rate hits lowest levels since 2008, economists say Americans have ‘excess savings’ that will provide a buffer

As inflation spirals out of control and pandemic-related stimulus runs dry, Americans are increasingly finding it hard to save money.

This past April, the U.S. personal savings rate fell to 4.4%. According to data from the U.S. Commerce Department, this is the lowest this metric has been since September 2008, Yahoo Finance reported.

“In a typical cycle, a sharp drop in the savings rate would be a warning sign about the sustainability of spending,” Wells Fargo economists, led by Tim Quinlan, wrote in a public note this past week.

The note continued, “Because balance sheets are in such better shape, we see less cause for concern for today. In fact, it is actually our baseline forecast for the saving rate to fall below its prior-cycle average of 7.2% through the end of 2023.”

The personal savings rate is a data series that is one of the most inversely impacted by the government’s efforts to bolster the economy through the COVID-19 pandemic. A steep decline in the amount of money Americans have been able to save has been expected for some time.

In April 2020, the savings rate hit a record 33.8% as stimulus checks from the government provided consumers with much needed relief as the nationwide response to COVID-19 kept many people at home and forced businesses to close.

Economists believe that there are trillions of dollars in unused savings that Americans can use to keep themselves afloat despite a rapidly increasing number of Americans not being able to contribute to their savings and grow their nest eggs.

Ian Shepherdson at Pantheon Macroeconomics said that Americans becoming unable to save their earnings is “no big deal.”

The macroeconomist said, “The stock of excess savings is still $2.2 [trillion], and the rundown over the past three months has averaged only $41 [billion] per month.”

Shepherdson continued, “This can continue for a long time yet, but that won’t be necessary as real incomes will start to rise again in the second half [of 2022].”

Wells Fargo economists recently estimated that U.S. consumers have around $2.3 trillion of savings they labeled “excess savings.” This label denotes savings above and beyond wheat pre-pandemic trends showed the American public being able to save.

These economists noted, “Households have accumulated an estimated that $2.3 trillion (not annualized) on their balance sheets and household net worth rose about 30% over the past two years through the fourth quarter. This overall rise in net worth is true across wealth percentiles and leaves households in a relatively better financial position than after past recessions.”