U.S. net saving as a percentage of gross national income
fred.stlouisfed.org
fred.stlouisfed.org
Thankfully, there's another chart that's linked from the first chart, representing personal savings rate:
https://fred.stlouisfed.org/series/PSAVERT
So I guess personal savings rate is falling over time (from ~10% between 1960 and 1990, to ~5% in 2000 and beyond), and gross national income is growing (and maybe even accelerating), which is why the ratio of one to the other has a more pronounced decrease.
Yet I wonder how this data squares with this report from last month:
"The US economy's safety net is bigger than anyone thought"
https://www.businessinsider.com/us-household-savings-estimat...
The story seems to be large government deficits balancing out the high savings of households/businesses, which is why the overall savings rate is near zero.
* Median household net worth increased by 35% from 2019 to 2022, adjusted for inflation. For the bottom quartile of households, the median household net worth increased by a whopping 900%.
2. Savings rate is a point in time metrics -- d/dt if you wish. A safety net would be the 'area under the curve'.
3. The savings rate is dropping because of increased unemployment and increasing inflation.
https://fred.stlouisfed.org/release/tables?rid=50&eid=4773#s...
Number of people employed 2019(pre-pandemic)/2023: increase of 1.9%
Population of the USA 2019/2023 (estimates): increase of 3.5%
The situation could be the same of better (ie: it's possible the population is younger and we should account for that); but clearly the job market is doing worse (regardless of population) per-capita than in 2019. This will have inflationary effects (things are more expensive, more disruption of services, etc...) as there are more new people in the country than people working.
The way the U6 rate has been gamified, it'll probably be useless as a metric by the end of the decade.
It's more or less the opposite (though with some of the same concerns); this is driven by an _aging_ population. The population is going up due to birth and immigration, but faster than that is happening, people are aging out of the workforce.
This is pretty much what all developed countries are facing; the US isn't as far along as most (it's relatively young).
As boomers exit the labor market, jobs free up. That may not be the only explanation but it's likely part of it.
Yes, because the denominator for labor force is the population over 16, on the premise that people age into "working age", but never age out of it, a demographic bulge entering the age range at which people both retire if they can, and frequently become unable to work even if they can't afford to retire, drops labor force participation rate when you don't have a similar demographic bulge entering working age.
The prime age labor force participation rate (the LFPR with a denominator based on prime working age having not only an entrance age of 16 but also an exit age of 55) is not low, in fact, its the highest its been any time since the dotcom bubble burst in 2001. So, yes, the low overall LFPR is entirely explained by "we have lots of old people".
Don't those express the same underlying truth? In an economic situation without safety net backstops, citizens have to save in order to survive contractions. In modern america, they don't need to as much. So they don't.
FWIW this is a real problem with "savings" as a metric. It's defined based on "disposable income", therefore fails to track things that probably "should" be savings but are accounted for separatly. Your 401k match or HSA deduction is not "savings", for example, even though clearly they are, and clearly they represent the kinds of savings that would have shown up in a bank account (and thus have been technically "savings") in the 60's.
Personal saving as a percentage of disposable personal income (DPI), frequently referred to as "the personal saving rate," is calculated as the ratio of personal saving to DPI.
Personal saving is equal to personal income less personal outlays and personal taxes; it may generally be viewed as the portion of personal income that is used either to provide funds to capital markets or to invest in real assets such as residences.(https://www.bea.gov/national/pdf/all-chapters.pdf)
This is much more meme than truth, and it's frustrating how many people just take this kind of statement as a prior. Here's a FRED chart of median personal income as a fraction of per capita GDP: https://fred.stlouisfed.org/graph/?g=1b46r
Indeed it has been trending downward, but... not by a lot. In the 80's it was 61% or so (so the median person got 61% of their "fair share" if the GDP was shared equally). Right now it's about 53%, up from a minimum in 2013 of about 52%.
And of course in exchange real per capita income has grown wildly (up more than 50%) in that same 40 years. If you told someone in 1980 that you could get a 50% raise, but only if the people above you on the ladder were allowed to get a 65% raise, would you have rejected it?
So, no, not by a lot. I think I stand by that. If you're genuinely upset over 25% fairness in a context where everything else looks so much better, my contention is that you're just looking for something to complain about.
Because that's how I read it, and I hope it isn't a rhyme.
i think instead of thinking of it as saving, it's more "unable to spend". Now that they are able to spend again, they do.
There was never an intentional savings spree imho.
EDIT: Never mind. Personal savings are still stable [2]. Net savings included federal deficits.
The median is the relatively ugly picture.
The average American has invested a lot in housing and equities, both of which have soared over the past 20-30 years.
The average wealth per adult in the US is ~$550,000. That's just behind Luxembourg for #2 in the world (led by Switzerland at $685,000). That's a shocking average figure for a nation with 250+ million adults. It's closing in on double that of Sweden, and it's 2/3 higher than the UK or France. It's well over double that of Germany. It's also far higher than very affluent Norway. The US Gini figure is also lower than Sweden now (Sweden has become one of the most unbalanced affluent societies due to their horribly failed immigration integration over the past decade or so).
If you're American, you definitely want to be average (or above), not median.
How about the median wealth per adult? ~$107,000 for the US. That's above Austria, Germany, Sweden, Finland, Japan, Singapore, Spain, Italy. And it's below the Netherlands, France, Canada, Norway, UK, etc.
Germany's median wealth per adult is a mere $66,000. They should be asking some serious questions. Greece is at $53,000 and Portugal is at $70,000 for refence. The UK is up at $151,000, with France and Canada around the $135,000 area.
A lot of this is related to differences in (a) rate of home ownership, and general structure of the housing market, and (b) how pensions work. There's some messiness, but in general these measures of wealth don't account for defined benefit pensions (ie a pension where you get X$, inflation adjusted, per month until you die) very well.
Mean: about +22% Median: about +35% Median within the poorest 25% of households: +900% (!)
Isn't that because most of that "wealth" is from inflated prices of houses? Over 50% of germans rent so over the median point, in US only 34%.
With so much wealth at the too, average is going to be pulled up even when there are many with relatively near zero.
Note: The discussion was on savings. Abstracting that from individual wealth adds cognitive load.
Thank God Americans aren't dumb enough to let their money rot in an account that gives virtually no benefit.
They take what people make, then subtract out money spent on goods, services, and taxes, and interest payments. The money left over is what is considered.
Then again, Americans have other options to park their assets that are far better places of retaining capital AND growth at the same time, housing being one, stocks being another, bonds being the third worst. So FDIC is about as good as BFR will ever lend you, and currently that means what I noted above - a dumb fucking decision.
negative savings rates are hard and brutal depression territory.
But if you are trying to drive or merely gauge your investment performance, or your voting strategy, this is hard to read. For example, it's fair that people were able to spend much less during Covid. Bad for vendors, great for people's overall savings which had been often too low for a while. And so, fair that there was a rebound in spending. Which is a problem when it leads to high interest rates and a major step in inflation (which some people deny exists altogether). Meanwhile there was giant increases in money supply. Most of which is not going to be re-absorbed anytime soon if ever. And is bound to have a commensurable effect. Etc, etc, etc.
And so in the end how do I interpret my current investment performance? (And equally interesting question is how should our country spend / invest / repay / drive this or that). Just pick a question, any question. Is most of my investment performance purely driven by increased money supply? (meaning that even if I over-performed indexes, I may have grossly underperformed inflation - i.e. be much poorer). Hard to tell actually. Of course one way is simply to spend conservatively (i.e. too little) and invest "more than needed". But obviously that's grossly sub-optimal. For example if your objective is to spend more than comfortably so as to die pennyless <- it's an exageration but not a bad strategy depending on family or donation objectives. Anyway. Tough job.
https://fred.stlouisfed.org/series/PSAVERT - this data series is labelled "Personal Savings Rate" and shows a big spike over the pandemic years, which would square with the increase in household net wealth. Maybe 'personal savings rate' refers to households, and so the story here is a transfer of wealth from the government to households over the pandemic years?
Of course (now I'm really extrapolating) the govt is just funded by taxes, so maybe that further reduces to a transfer of wealth from future households/businesses to current households.
https://fred.stlouisfed.org/series/W202RC1Q027SBEA
But Government saving is obviously in a pretty big deficit: https://fred.stlouisfed.org/series/TGDEF
Net saving is:
> equal to the sum of personal saving, undistributed corporate profits with inventory valuation and capital consumption adjustments, and net government saving. [0]
To break that down further:
Personal Saving is 'Post tax income less consumption'. That looks like this: https://fred.stlouisfed.org/series/PSAVE
Undistributed corporate profits with inventory valuation and capital consumption adjustments is a measure of how much profit companies made, but did not return to shareholders (with an adjustment to remove the effect of inflation). That looks like this: https://fred.stlouisfed.org/series/B057RC1Q027SBEA
Net Government saving is (oversimplified, but basically) the deficit: https://fred.stlouisfed.org/series/TGDEF
GNI is sort of like GDP, but slightly different (treat it like the same for nearly all intents and purposes).
What this chart is basically showing, is that Federal deficits are up, but it's not translating to a higher household savings rate (As was the case during the stimulus period) OR higher retained corporate earnings.
I'd argue that the actual number is an intellectual exercise (i.e. it's relatively meaningless that it is now negative), but it is worth investigating why the Government is running such a large deficit in a hot economy that is not leading to better quality of life (Personal savings is a rough proxy for that).
[0]https://www.bea.gov/help/glossary/net-saving#:~:text=A%20mea....
This is not to say there is no objective economic reality, but meaningful comparisons over time and across different economies seem very hard. Thats why "economically you never had it so good" can coexist with outer despair.
And this before we account for the non-accounting of externalities and the variable long term sustainability of different lifestyles (the wealth transfer from future generations).
IIUC, GDP counts income owned by foreigners that happened in the US. GNP counts income only owned by residents of the US that happened in the US.
If someone from China owns a toaster making factory in the US, which employs no one, and it generates $100M of toasters a year - that's in GDP but not GNP.
Also income of US residents that happened outside the US, no?
IIUC, "domestic" is location-based while "national" is residency-based.
So much more that many things (cars, houses, etc..) in some areas doubled in price and people have spent all their savings to live the same life they had in 2019.
Pessimism seems to be in vogue right now (or maybe always?) but in this case the data doesn't seem to bear it out.
https://www.wsj.com/articles/pandemic-savings-in-u-s-running...
You can also see that debt has fallen, p31 of the report I linked. So that's another mechanism through which median net wealth has increased, which is not asset price inflation.
As far as sources, I trust a technical Fed report more than an opinion analyst piece written by 'economists' in a private bank. I may be biased as a formal central bank economist :) That report is half speculation about the future ("looks set to end soon, with excess household savings likely to be depleted by year-end"), whereas what I linked is actual data from the past.
So you trust in what you already have faith in? That's not a source that inspires confidence in our discourse.
>That report is half speculation about the future ("looks set to end soon, >with excess household savings likely to be depleted by year-end")
As other pointed out in this thread this data suggests differently. https://fred.stlouisfed.org/series/PSAVERT All trends are speculations about the future. From your own report: "By this metric, in the 2022 survey, 82 percent of families in the top decile of the usual income distribution saved, compared with 66 percent of families in the upper-middle segment and 43 percent of families in the bottom half. Between 2019 and 2022, the overall fraction of families that saved edged down from 59 percent to 56 percent, with decreased saving observed among all three segments."
So savings spiked then disappeared at the same time all these positive numbers on assets began to surface. How interesting.
Yet, "Among families in the bottom quartile, median net worth was $400 in 2019 and $3,500 in 2022, and *mean net worth was negative $15,700 in 2019 and negative $5,300 in 2022.* Among families in the top decile, median net worth was $3,012,500 in 2019 and $3,794,600 in 2022, and mean net worth was $6,641,800 in 2019 and $7,810,500 in 2022."
In addition to, "Younger people – those below the age of 35 – are far more likely to rent than are other age groups: About two-thirds (65.9%) of this age group lives in rentals. This compares with, for example, 42% of those ages 35 to 44, and less than a third (31.5%) of 45- to 54-year-olds." (https://www.pewresearch.org/short-reads/2021/08/02/as-nation...)
So the growth in assets from homeownership doesn't make sense for a large majority of the population; but, for those who rent the increase in personal savings makes a ton of sense given the CDCs moratorium. The increase in upper class wealth makes sense as many bought additional homes; which fits with the ever increasing prices in homes. The decrease in savings and the rising cost of borrowing would indicate trouble ahead. The confidence gained from well manufactured data is fleeting.
I trust central bankers to not straight up make up or lie about facts, because I worked in one and formed an impression of what the institutional culture is like, yes. I did volunteer that information to you though.
The rest of what you're saying sounds like older people have seen increases in net worth because of asset price inflation, and younger people have seen increases in net worth because of covid-related measures ("CDCs moratorium"). That sounds right to me too!
Take a look at median income / median home prices to see we're dropping fast.
https://www.tradingview.com/chart/ASPUS/GJp6Gfq6-Home-Prices...
This isn’t really true [1]. American savings rates have been secularly falling since the 60s, but they’re relatively healthy right now.