When lockdowns triggered by the threat of catching the contagious virus sent unemployment rates to unprecedented levels, it also triggered several massive rounds of government assistance, some of which went to most of the country, not just to people who were out of a job. That, combined with fewer opportunities to travel, eat out, and otherwise spend, led to the surge in the savings rate. But as the economy has recovered, these relief and economic stimulus measures have wound down, and in September, the savings rate fell to typical pre-pandemic levels for the first time because people spent more and took in less than in August. What isn’t back to normal? The extra savings many households have accumulated over the last year and a half, estimated by some at more than $2 trillion over what they would have saved had we not had a pandemic. It’s one reason many analysts are optimistic that consumer spending will help power the economic recovery despite disappointing growth in the third quarter. “Households are now starting to dip (a toe) into a massive cache of savings,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary. “Plenty of fuel to drive spending in the quarters ahead.” Have a question, comment, or story to share? You can reach Helen at hreis@thebalance.com.
