Americans are spending their savings
The savings rate in the United States has hit the lowest level since the early 1930s, the Commerce Department says. Back then the Great Depression was the reason. What's going on now? Amy Scott reports.
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KAI RYSSDAL: It's a Thursday today. 2007, by the way. But the news of the day comes to us from the waaaaay back machine: 1933.
The personal savings rate the year Franklin Roosevelt moved into the White House was -1.5 percent of disposable income. Makes sense that people were dipping into their savings when you remember the Great Depression was in full swing.
Seventy-three years, later the economy's a whole lot better. But we've gone back to our spending ways.
The Commerce Department told us this morning that last year, the savings rate hit it's the lowest level since the early 1930s.
Marketplace's Amy Scott reports
AMY SCOTT: Last year, Americans saved -1 percent of their disposable income. Which means they spent everything they earned, and then dipped into savings or borrowed to spend more.
It's one of the great quandaries of the consumer economy. Spending fuels growth and creates jobs. But Standard & Poor's economist David Wyss says this kind of spending just can't last.
DAVID WYSS: I don't know what people expect to do. They're just not thinking very much about tomorrow.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.
CARL STEIDTMANN: What we've seen over the last decade or so is a pretty significant accumulation of wealth on the part of households, both through the stock market as well as through housing. And in a sense, consumers are letting their houses do their savings for them.But analysts say the recent boom can't last forever. Plenty of people don't invest in the stock market or own homes. And it is possible to save money and still watch the economy grow.
In China, one of the world's fastest growing economies, the personal savings rate is an estimated 30 percent.
In New York, I'm Amy Scott for Marketplace.
