The last two times Americans were saving this little in order to maintain their lifetsyles, the US economy was in recession.
According to newly revised government data, Bloomberg reports that American households scaled back their pace of savings to the lowest level in nine years at the end of 2016 as the growth of their wages and salaries slowed.
The personal savings rate was 3.6% in the fourth quarter of 2016, down from a previously published 4.9%, according to somewhat dramatic annual revisions to gross domestic product and related data, released Friday by the Commerce Department. That’s the lowest reading since a 2.8% rate in the final three months of 2007, just as the U.S. was entering a recession.
The saving rate recovered somewhat in the first three months of the year, to 3.9% after a previously reported 5.1% . In the second quarter, it was little changed at 3.8%.
The lower fourth-quarter rate was one of the bigger changes in the government’s annual update of GDP, and paints a quite different picture from the "recovery" images put forward by the Obama administration.
Instead of recovery, as Bloomberg notes, the figures suggest that consumers were saving less to maintain their spending entering 2017. That’s significant because consumption accounts for more than two-thirds of gross domestic product, and the revisions may help explain some of the slowdown in first-quarter purchases.