As red flags go, this is a big one. The personal savings of Americans have plunged this year, hitting $629 billion in the second quarter of 2022, according to data from the Federal Reserve Bank of St. Louis. That’s down from $1.98 trillion in the second quarter of 2021, and down from recent highs of $3.99 trillion in the first quarter of 2021 and $4.85 trillion in the second quarter of 2020.
Economists have been warning of a recession as the Federal Reserve continues to increase interest rates in an attempt to cool 40-year-high inflation. During the early days of the pandemic, several government programs, including enhanced child tax credit payments, unemployment benefits and generous stimulus checks, helped boost personal savings. With the end of those programs, savings have plummeted. In fact, the personal saving rate — meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money — fell to 3.5% in August, according to the Bureau of Economic Analysis. It’s quite a U-turn: The personal saving rate recently peaked at 26.3% in March 2021 and 33.8% in April 2020. But the drop in the personal saving rate isn’t all pandemic-related: In January 2020, before the coronavirus pandemic, it was 9.1%.
“The pandemic has left people in a vulnerable state.”