Friday, December 23, 2011

Personal saving hits lowest level in four years

Households have been drawing down savings as incomes stagnate. Savings can only fall for a period of time before people start cutting back consumption to rebuild those savings.

In 2007, just before the economy crashed, the savings rate had fallen to 2.0%. What followed was a pullback in consumption that weakened the economy and contributed to the overall downturn.

The savings rates is now down to 3.5% (down from a peak of 8.3% in May ’08). While 3.5% is better than 2.0%, unemployment is still far higher than it was in 2007, so it’s reasonable to think that 3.5% (or thereabouts) may be the new, 2.0%. Incomes have to rise from here for this trend not to become problematic.


Mario said...

congress just extended the payroll cuts....looks like we're "saved" for another couple months.

Even though they're all losers I do agree with what Harry Reid says here:

“I hope this Congress has had a very good learning experience, especially those who are newer to this body,” Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters after his chamber’s action today. “It seems that everything we’ve done this past year has been a knock-down, drag-out fight. There is no reason to do that."

googleheim said...

investment savings is a function of government spending

merry christmas

happy new year

felice hanukah