https://www.dailywire.com/news/personal-savings-rate-plummets-to-lowest-level-since-2005

Americans are now saving the smallest portion of their earnings in nearly two decades, according to data released on Thursday by the Bureau of Economic Analysis.

Even as personal outlays increased by $154.2 billion in October, households only saved 2.3% of their disposable income — the lowest level since 2005.

Americans generally saved between 7% and 9% of their incomes in the years before the lockdown-induced recession in February 2020, according to data from the Bureau of Economic Analysis. Following various stimulus measures intended to bolster economic activity, savings rates soared beyond 10% and at times above 30% between April 2020 and March 2021.

The more recent declines, however, occur as price levels rise faster than nominal wages, constituting an overall decrease in purchasing power. Americans have therefore turned to credit and savings to fuel their expenses. Even as savings rates fell, the total level of consumer loans increased by $300 billion between January 2021 and October 2022, according to data from the Federal Reserve.

David Bahnsen, the founder of Manhattan-based wealth management firm The Bahnsen Group, told The Daily Wire that consumer spending has not declined historically until consumers see lower wages or lose access to credit. “Wages are increasing, not decreasing, so I do not imagine we are close to a real substantive threat to the consumer,” he remarked.

The most recent payroll and unemployment data from the Bureau of Labor Statistics revealed that companies added positions in November even as average hourly earnings rose 5.1% year-over-year. The most recent price level report from the Bureau of Labor Statistics, however, showed 7.7% headline inflation as of October. Inflation data has not yet been released for November.

When asked whether the personal savings rate could turn negative, Bahnsen noted that such a phenomenon has not occurred either before or after the 2008 financial crisis. “Yet I think it is moot,” he commented. “A savings rate this low is awful because it exposes households to future distress, it indicates poor defense against tough times, and it removes the building block for future productive investment.”

An August survey from Bankrate found that Americans are changing their behavior as various economic pressures persist. Among the 74% of respondents who are taking steps to prepare for a recession, 47% said they would reduce discretionary spending, 35% said they would save more for emergencies, and 30% said they would pay down credit card debt.

Despite the professed desire to tighten their belts, Americans participated in the most robust opening weekend for the holiday shopping season on record. As many as 196.7 million consumers shopped during the five days between Thanksgiving and Cyber Monday, according to data released by the National Retail Federation, easily surpassing the group’s initial projection of 166.3 million shoppers. The typical consumer spent $325.44 on holiday-related purchases throughout the weekend, exceeding the $301.27 average recorded last year.

National Retail Federation CEO Matthew Shay remarked during a press call that many households have been “a bit more cautious” with their expenditures, while some families are “taking on additional debt” and “tapping into savings” to meet monthly expenses and cover additional spending during the holiday season.

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